Pakistan Remittances: Pakistan’s New Headache – Slow Remittance Flows

Yawning Current Account Deficit (CAD) — the difference between inflows and outflows of foreign currency, Pakistan Received low dispatch in May. This will create new concerns for the Prime Minister of Pakistan Shahbaz Sharif And his team has demanded an immediate relief package from Islamabad. International Monetary Fund (IMF).

The IMF has already asked Pakistan to control its rising CAD, which is under pressure due to spurt in commodity prices, including oil.

Data from Pakistan (SBP) shows that remittances in May stood at $2.3 billion compared to $2.5 billion in the same month last year. Remittances mainly flowed from Saudi Arabia, the United Arab Emirates, the UK and the US.

Remittances comprise an important source of foreign exchange inflows, which fuel overall economic growth. If the trend continues, it could deepen the balance of payments crisis leading to further inflation.

In terms of growth, remittances declined by 25.4 per cent on a month to month basis, as against a decline of 6.9 per cent on a year-on-year basis, a press statement issued by SBP said, adding “largely to the normal seasonal post Eid decline and related denotes a long holiday.

Analysts said this could reflect a major breakdown in the economy. “While the country’s central bank has said that this is a post-Eid trend, it is something that will be monitored in the coming weeks. Rising political instability is a cause for concern and remittances are likely to slow due to this. ,” an analyst told India Narrative.

Several Pakistani observers took to social media, including Twitter, to express their concern over the slowdown in remittance flows.

Muzammil Aslam said, “Remittances dropped to just $2.3 million in May, a 25% drop from last time. People have stopped sending money to Pakistan under this imported regime.” Pakistan Tehreek-e-InsafiSpokesperson on the economy (PTI) tweeted.

Rating agency Moody’s has now downgraded Pakistan’s outlook from “stable” to “negative”, indicating that the country’s CAD will remain under pressure in 2022-23 amid high import bills on commodities.

However, a part of the remittances would have arrived in the country through unofficial channels.

Cumulatively, data from the country’s central bank shows that remittances of $28.4 billion during the first 11 months of this fiscal year grew by 6.3 percent year-on-year.