In December 2023, Pakistan experienced a notable uptick in the inflow of overseas workers’ remittances, reaching $2.4 billion, marking a 5.4% increase on a month-on-month basis compared to the $2.25 billion recorded in November 2023. The State Bank of Pakistan (SBP) released this data on Wednesday, revealing a positive trajectory in the monthly remittance flow.
On a yearly basis, the December 2023 remittance inflow reflected a substantial increase of 13.4%, standing at $2.1 billion in the same month of the previous year. Despite global economic challenges, home remittances continue to play a pivotal role in supporting Pakistan’s external account, stimulating economic activity, and supplementing the disposable incomes of households dependent on remittances.
In December 2023, workers’ remittances recorded an inflow of US$2.4 billion.
For details see https://t.co/rPOvn9Dr8Nhttps://t.co/7XBd4uOcHC#SBPRemittances pic.twitter.com/nXXRbkXOc5— SBP (@StateBank_Pak) January 10, 2024
For Data Table by StateBank of Pakistan (SBP) click on the link!
However, this positive momentum in December contrasts with the overall trend for the first half of the fiscal year 2023-24. During the period from July to December 2023, workers’ remittances amounted to $13.43 billion, indicating a decline of 6.8% year-on-year or $982.8 million when compared to the $14.42 billion registered in the same period of the previous fiscal year.
Breaking down the sources of remittances, expatriates in Saudi Arabia took the lead in December 2023, remitting $577.6 million, showcasing a 6% monthly increase and over 9% growth compared to the same month in the previous year. The United Arab Emirates (UAE) witnessed a marginal 2% monthly increase, reaching $419.2 million, while experiencing a significant 27% year-on-year surge.
Remittances from the United Kingdom rose by 7.5% to $368 million in December 2023 compared to November. Remittances from the European Union also demonstrated resilience, improving by 19% year-on-year and 6% monthly, totaling $284.9 million in December.
Pakistanis residing abroad in the US sent $263.9 million in December 2023, an 8.5% rise over the same month the previous year. Despite these encouraging trends, the World Bank has forecast a potential decline in remittance flows to Pakistan, citing a shift from official to informal channels, economic unrest, high debt, and a balance of payments crisis as contributing factors.
“CHALLENGES AND OPPORTUNITIES: WORLD BANK PROJECTIONS ON PAKISTAN’S REMITTANCE LANDSCAPE”
The World Bank’s latest report, “Leveraging Diaspora Finances for Private Capital Mobilization,” sheds light on the complex dynamics impacting Pakistan’s remittance landscape. According to the report, Pakistan is projected to witness a decline in remittance flows to $24 billion in 2023, followed by a further drop below $22 billion in 2024, representing a 10% decline.
Remittances have shifted from official to informal channels due to economic challenges like a high debt load and a balance of payments crisis, which have damaged public confidence.
The report states that formal remittance flows are expected to decline by 20% in 2023, on top of the 5% decline observed in 2022.
Due to the sharp depreciation of the rupee and government measures restricting capital outflows, remittance inflows are being diverted from official channels, resulting in shortages of foreign currency. Apart from Pakistan, this pattern has also been observed in Bangladesh and Sri Lanka.
Despite the employment of foreign workers in Saudi Arabia, outward remittances have decreased, potentially due to post-COVID adjustments and Saudi Arabia’s policy allowing foreign migrant workers to bring their families, potentially reducing remittances.
To counter the decline, several countries, including Pakistan, Bangladesh, Sri Lanka, and Nigeria, have introduced incentives to encourage formal remittance flows. The report cites the Pakistan Remittance Initiative, associated with a 13% increase in formal remittance flows.
Although, the report notes that such incentives may have limited impact in countries with significant differences between parallel and official exchange rates. Additionally, various countries have imposed pecuniary or restrictive measures on migrants.
On the other hand, remittance flows to South Asia as a whole are predicted to reach nearly $189 billion in 2023, exceeding earlier projections by $13 billion. Remittances to India, which are anticipated to reach $125 billion in 2023, are primarily responsible for this amazing rise.
As of 2023, remittance growth in South Asia is expected to slow down, with some countries experiencing significant declines while others will see high growth. High-income countries’ lower inflation and a tight labour market in the US are the main drivers, along with employment growth in Europe.
