Remittances hit seven-month high at $2bn

The inflows of remittances by overseas Pakistanis hit a seven-month high at $2.53 billion in March, slightly improving the nation’s capacity to make foreign payments on time.

The State Bank of Pakistan (SBP) reported on Monday the inflows increased 27.4% to $2.53 billion in March. Non-resident Pakistanis sent a higher amount of funds to their family members to cope with the historically high food prices during the holy month of Ramazan.

A significant depreciation in the rupee against the US dollar recently made overseas Pakistanis send funds via official channels such as banks instead of the illegal hawala-hundi channels.

The data suggest that remittances usually peak in Ramazan or around Eid festivals yearly.

The receipts, however, dropped 10.7% to $2.53 billion in March compared to the same month of the previous year.

With the cumulative inflow of $20.5 billion during the first nine months (July-March) of FY23, remittances decreased by 10.8% compared to the same period last year, according to the central bank.

Read Pro-business reforms, policies sought

Remittances inflows during March were mainly sourced from Saudi Arabia ($563.9 million), the United Arab Emirates ($406.7 million), the United Kingdom ($422 million) and the United States of America ($316 million).

Remittances are a significant source of foreign financing and support improvement in foreign exchange reserves. The inflows are usually utilized to fund the trade deficit in Pakistan.

Earlier, the inflow of workers’ remittances sent home by overseas Pakistanis improved by 5% to almost $2 billion in February. This, however, was comparatively low, as a portion of non-residents continued to dispatch the funds through informal channels due to the availability of a better rupee-dollar exchange rate.

Overseas Pakistanis send the funds in foreign currency notes through official channels, like banks and exchange companies, or illegal hawala-hundi operators. The funds are paid in equivalent rupee amounts to the recipients in the country. Therefore, an attractive exchange rate remains a tool available in both markets – formal and informal – to attract remittances.