KARACHI: The remittances sent by overseas Pakistani workers dipped month-on-month by 4 percent and 10pc year-on-year to $2.1 billion in May.
The latest data released by the State Bank of Pakistan (SBP) on Tuesday showed that the country lost $3.7bn in remittances during the first 11 months of FY23 mainly due to a widening exchange rate gap.
The inflows tumbled by 12.98pc to $24.831bn in 11MFY23 compared to $28.489bn in the same period of last fiscal year.
The country has been struggling hard to get a $1.1bn tranche from the IMF for a year but the shrinking inflows of remittances could make it more difficult for the country to manage the external account with poor foreign exchange reserves of less than $4bn.
Pakistan received $2.102bn in May compared to $2.198bn in April. It received $2.346bn in May last year.
Currency dealers have consistently been drawing the attention of the government to address the reasons for the decline in remittances but no timely measures were taken to limit the growing role of the grey market which has practically replaced the exchange companies.
The illegal market offers dollar prices more than Rs20 per dollar higher than the banking market rate. The exchange companies were facing a serious shortage of dollars so the price of greenback went up open market to come close to the grey market rate. The grey market attracted remittances.
At the same time, the State Bank permitted importers to arrange dollars for their imports. The importers rushed towards the grey market which further strengthened it and remittances declined due ever increasing dollar rates in the grey market.
The biggest inflow was from Saudi Arabia but declined by 16.3 percent to $5.924bn. The 2nd highest inflow was from UAE which was around $4.321bn but it also showed a decline of 19.2 per cent.
Pakistan received 3rd largest amount of remittances from the UK which was $3.718bn; it shows a decline of 8 percent compared to the last year.
Other significant inflows were from the USA with $2.824bn (0.9 percent up), GCC countries $2.918bn (11.5 percent down), and $2.839bn from EU countries showing a decline of 7.7 percent.