KARACHI: Pakistan received over 54 percent of remittances from the Gulf region between January and November 2022, according to official statistics compiled by the central bank, with major contribution coming from Saudi Arabia.
The country received $14.99 billion in remittances from the Gulf Cooperation Council (GCC) members states during the outgoing year, with the overall remittance inflow recorded at $27.48 billion.
The State Bank of Pakistan (SBP) data show the Pakistani diaspora in Saudi Arabia remitted $6.67 billion in 2022 which was closely followed by its citizens in the United Arab Emirates (UAE) who sent $5.10 billion.
“Pakistan primarily depends on two countries, Saudi Arabia and the UAE, which are major sources of remittance for the country,” Tahir Abbas, research head at the Arif Habib Limited, told Arab News. “They are followed by other states like Oman, Qatar and Kuwait.”
Abbas described remittances as the lifeblood for Pakistan’s economy amid perennial balance of payment (BoP) crises, saying the money sent by overseas nationals was a vital source to finance deficits.
“Our remittances are close to our export revenue,” he noted while pointing out that money sent by Pakistani nationals living abroad was vital to deal with current account deficits.
According to financial experts, the country witnessed growing remittance inflows through official channels during the COVID-19 pandemic when not too many people were traveling across the world. The government also took several measures to incentivize overseas Pakistanis to use wire transfer services.
The second half of the outgoing year, however, witnessed a slowdown in remittance inflows, with a substantial dip of 14 percent in numbers since last July. Official figures also showed a decline of 20 percent in remittances from Saudi Arabia and the UAE in the month of November.
“Pakistan’s remittances are a major source of financing trade gaps,” Dr. Khaqan Najeeb, former advisor to the finance ministry, told Arab News. “With scarce foreign exchange reserves, the country cannot afford a dip in remittances.”
Najeeb added the drop in remittances had taken place at a time when workforce export from Pakistan had increased three times during 2022. However, the massive exchange rate gap between open and interbank markets had once again pushed people to use informal channels to remit their earnings.
“Remittance flow is ultimately a factor of the workforce abroad,” he continued. “The GCC countries have traditionally been a place where flow of labor has been substantive. For future strengthening of remittances, increased flows, especially in longer term jobs, can be most helpful.”
Overseas employment promotors said a particular group of Pakistani community was engaged in running grey channels through traditional hawala and hundi system.
“The remittance through bank transfers is declining due to a strong grey channel,” Adnan Paracha, spokesman for Pakistan’s Overseas Employment Promotors Association, told Arab News. “Pakistani workers simply want to benefit from the gap between the open and interbank markets.”
He noted that a market-based exchange rate could ensure closing of gap between formal and informal markets and incentivize expats to use banking channels again.