According to a report, remittances to Pakistan have seen a drop of 22% in the two months of the fiscal year. Expatriate workers are increasingly resorting to methods to send money home due to the widening gap between official and unofficial currency exchange rates.
Data from the bank reveals that Pakistan received $4.12 billion in remittances from July to August compared to $5.29 billion last year. In August, remittances amounted to $2.09 billion, marking a 24% decline compared to the year but a 3.1% increase compared month on month.
Experts attribute this decline to the difference between interbank and grey market exchange rates. This difference has reached as high as 10%, tempting many Pakistanis abroad to choose illicit channels like hawala and hundi for money transfers.
Another factor contributing to this trend is the reduced deposits made into Roshan accounts, a government initiative to attract foreign currency deposits from expatriates. The difference in exchange rates and returns in the grey market has dissuaded some individuals from utilizing official channels.
The remittance decline is worrisome for Pakistan because these funds are vital for supporting the country’s economy and maintaining a payment system. Authorities must tackle the currency rate disparity and encourage the use of regulated remittance channels. This will help alleviate the decline and ensure stability in the Pakistani system.