Karachi, December 15, 2022 (PPI-OT): Remittances continue to tumble

As per the data released by the State Bank of Pakistan (SBP), the country’s monthly remittances posted a decline of 5%MoM and 14%YoY to close in at US$2.1bn. This took the total remittance inflow during 5MFY23 to US$12bn, down 10%YoY.

Declines in inward flow of remittances were seen across all the major host countries during Nov’22 with the greatest declines coming from the two largest markets of KSA and UAE, each posting double digit declines on MoM basis.

Earlier, as per the data released by PBS, the country’s trade balance was reported at US$2.9bn as imports posted a sequential increase of 11.3%MoM. Not withstanding the difference in reported numbers of SBP and PBS, the Current Account Deficit for Nov’23 is likely to settle around US$900mn – US$1.0bn mark, taking the cumulative CAD during the period to US$3.8bn.

With Pakistan having to contend with a booming black market of currency exchange, which also offers far more lucrative rates, the flow of inward remittances through official channels was inevitably going to fall. Unless, the authorities are able to decrease the spreads between the open and black markets, the remittances inflow will likely continue to fall short of expectations.

The currency will continue to face major headwinds in the coming months as the trade imbalances and debt repayments will continue to hammer reserves position. Country recently honoured its repayment commitment by retiring international sukuk with a maturity of ~US$1.08bn, which took the reserves position below US$7.0bn mark, less than 1.3x of monthly imports cover.