Overseas Pakistanis sent record remittances in October-2023.

According to data from the State Bank of Pakistan (SBP), remittances sent by overseas Pakistanis reached a seven-month high of $2.46 billion in October. This marks an improvement of nearly 12% from the previous month’s figure of $2.21 billion. On a year-on-year basis, remittances also increased by 9.58% compared to October 2022.

For the past six months, remittances have ranged between $2-2.2 billion, but in October, there was a notable improvement across the board, particularly from the United Arab Emirates and Saudi Arabia, which contributed 60% to the month-on-month increase. The crackdown on illegal foreign exchange trading launched by the government in September, along with SBP-mandated reforms, played a significant role in this improvement.

The gap between interbank and open market exchange rates, which cannot exceed 1.25% for five business days under the IMF agreement, had reached 8.5% at the start of September. However, it started declining after the crackdown and averaged 0.5% throughout October. This convergence of rates, along with a stable rupee and the ongoing crackdown against hoarders and hawala dealers, were major drivers behind the rise in remittances.

The increase in remittances is considered good news for a struggling economy, and it is attributed to more overseas Pakistanis using legal channels to send money following the crackdown and the lower difference in rates between currency markets.

In terms of the breakdown of remittances, the highest amount was received from Saudi Arabia, with $616.78 million, followed by the UAE with $473.91 million, the UK with $330.22 million, EU countries with $297.54 million, and the US with $283.26 million.

Although there has been a decrease in total remittances compared to the previous fiscal year, the current trend of a 13.31% reduction is an improvement from the previous 20% decline.

The rise in remittances is encouraging considering expectations of import levels normalizing shortly. The current account deficit, which turned negative in July 2023, is expected to be controlled by the uptick in exports and remittances.

A successful IMF review, the announcement of elections, and a stable currency are expected to boost market confidence and economic activity, ultimately helping sustain the trend of increasing remittances over the next few months.

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