The remittances of Pakistani workers abroad have become a matter of concern for the Pakistani government, which is facing a major financial dilemma in light of the scarcity of foreign exchange, which deepens the debt repayment crisis and the procurement of basic commodity import needs.
Pakistanis abroad are sending fewer dollars home these days, with remittances down 13% year-on-year to $22.7 billion during the first 10 months of the current fiscal year that began in July 2022.
The value of the declining transfers, amounting to $ 3.4 billion, is almost equivalent to the upcoming debt payments of $ 3.7 billion during the months of May and June, according to the Pakistani newspaper Dawn. The amount is also equal to the “financing gap” that Pakistan is struggling to arrange in order for the International Monetary Fund to pass a $6.5 billion bad loan to the state.
This loss of remittances from workers abroad becomes even more apparent, given the depleted foreign exchange reserves that are only enough to pay the bill for five weeks of imports.
The decline in remittances came from the various countries in which Pakistani labor is concentrated, especially the Arab Gulf countries, as the value of remittances from Saudi Arabia and the UAE decreased by only about $2.5 billion on an annual basis.
Remittances from Britain and the European Union also fell by $500 million. While the decline from the United Kingdom and the European Union is mainly attributed to higher costs of living amid the ongoing economic slowdown in those economies, the significant decline from the Middle East is driven by the reluctance of many diaspora Pakistanis to transfer through official channels, where the exchange rate is lower compared to the parallel market. .
Large traders and importers resort to the parallel market to buy foreign currency from Pakistanis abroad at a much higher rate than the interbank exchange rate to pay for their imports, as well as to circumvent central bank restrictions on imports to protect its scarce foreign currency reserves.
Overseas workers’ remittances have supported Pakistan’s current account over the past two decades. While its decline under the current circumstances increases the pressure on the state’s public finances, according to the Pakistani newspaper, especially with the failure to reach a financial rescue deal with the International Monetary Fund and the depletion of external financing from other sources, including the so-called friendly countries, as well as the decline in foreign investments.
Meanwhile, data issued by the Central Bank showed that foreign direct investment decreased by 29% on an annual basis, to $121.6 million last April, and by 23% in the first ten months of the current fiscal year.
The data reported by Dawn newspaper, on Wednesday, indicated that China was the largest investor with an amount of $348 million in the first ten months of the current fiscal year, but the amount was less than the same period of the last fiscal year, which recorded investments of $403 million.