KARACHI: Saudi Arabia remained the single largest contributor of remittance to Pakistan in January 2023 as overall inflows last month declined by 13 percent to $1.89 billion compared to last year, falling below the $2 billion level after 31 months, according to central bank data released on Monday.
The cash-strapped South Asian nation received 9.9 percent lower remittances in January than December 2022 and 13.1 percent lower than the same period in January 2022.
Pakistan had received $18 billion during the seven months of the last fiscal year but this year inflows dropped by $2 billion to $16 billion.
“With cumulative inflow of $16 billion during first seven months of FY23, the remittances decreased by 11 percent compared to the same period last year,” the State Bank of Pakistan said in a statement on Monday.
Pakistan received $3.9 billion from Saudi Arabia during the seven months of the current fiscal year as compared to $4.6 billion, posting a decline of around 15 percent. Pakistan had received $7.75 billion from Saudi Arabia in last fiscal year.
The central bank said during January 2023, remittances were mainly sourced from Saudi Arabia with inflows of $407.6 million, United Arab Emirates $269.2 million, United Kingdom $330.4 million and United States of America $213.9 million.
The country received $269.2 million from United Arab Emirates in January 2023 and $2.9 billion during the seven months of the current fiscal year, according to the central bank.
Pakistan has received more than $2 billion in remittances on a monthly basis since June 2020. This January's fall below $2 billion has been witnessed seen after 31 months.
Financial experts said the key reasons for a drop in remittance inflows through official channels was the huge gap in exchange rates in the open market and interbanks.
“The exchange rate in open market was very high as compared to the interbank market, which was very low, which is why Pakistani workers were using hawala [unofficial channels] for money transfer,” Farhan Mahmood, head of research at Sherman Securities, told Arab News.
The difference between the open and interbank market rate has been as high as Rs50 against the United State dollar in recent weeks.
“The huge gap between open and interbank coupled with the already slowing global remittances flows dented the official remittances,” Mahmood said.
Analysts said as the gap between open and interbank markets narrowed, the inflows of remittance through official channels would improve in the current and upcoming months.
“I think that the inflows would start improving from February onwards as the gap has narrowed and also those people who were waiting for market adjustment will be encouraged to remit funds,” Mahmood added.
The Pakistani national currency on Monday closed at Rs269.44 against the United States dollar in the interbank market while the currency traded at Rs273 for selling and Rs270 for buying in open market.
