The Disturbing State of Falling Remittances By Overseas Pakistani
According to data released by the central bank on Thursday, remittances from Pakistanis living abroad decreased by 19 percent in July. This decline was caused by the Pakistani Rupee’s (PKR) staggering decline in value in 2023 as well as the currency’s loss of Rs. 13 between June and July, which is causing some expats to hold back on sending as much money home because there are fewer needs in Pakistan with rupees as a unit of exchange.
The present real estate collapse has made it much more difficult for expats to send money home. Remittances from employees assist Pakistan’s real estate market grow since expats frequently choose to spend their life savings in this industry.
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Even if the difference between the open and interbank markets has shrunk in recent weeks, the unofficial/hawala market exchange rate has remained above Rs. 300 per US dollar.
People are sending less money home as a result of subpar real estate performance, according to economic analyst A H H Soomro. In Pakistan, there are also less needs in rupees. As opposed to last year, someone sending Rs. 100,000 now needs to send $330. Given the stability of the currency and the narrowing of the open market gap, that seems to be the only logical explanation.
While importers tried to have their containers cleared from ports but many of them struggled to secure a single letter of credit (LC) on the opposite side via legal procedures, currency brokers in July reported insufficient demand in the illicit market. Some importers chose to purchase goods from other nations without opening LCs and turned to the hawala market to suit their demands. As a result of the dramatic decline in the value of the PKR, they were forced to pay greater surcharges.
Globally, the cost of living has increased due to inflation in wealthy nations like the United States, the United Kingdom, and Europe, leaving expats with little alternative but to spend more on themselves in order to survive and less money to send home to Pakistan.
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The amount of inflows in July was $2.026 billion, which is the lowest amount since February 2023, when they were $1.990 billion. On a year-over-year (YoY) basis, worker remittances from Saudi Arabia decreased by 16 percent, while those from the United Arab Emirates, the United Kingdom, EU nations, and the United States decreased by 31 percent, 25 percent, 4 percent, and 4 percent, respectively.
This reflects the effects of the advanced economies’ economic slump, which has so far persisted since Russia started its conflict in Ukraine and has had a significant negative impact on foreign labourers who are experiencing unemployment.
In addition to rising commodity prices and slowdowns in host-country economies, which ex-pats move to in order to improve their standard of living, the decline in remittances in July is a negative portent for Pakistan’s economic stability.
Global economic uncertainty, subpar real estate performance, and extremely fluctuating exchange rates all had an effect on Pakistani remittances received abroad in July. We may witness a further fall in remittances in the upcoming months as a result of the IMF’s expensive bailout and the political unpredictability surrounding the General Elections in October.
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