SBP reports $112 million increase in workers’ remittances

In September 2023, Pakistan experienced a notable surge in workers’ remittances, marking a 5.3 per cent increase compared to August 2023.

This uptick can be primarily attributed to a crackdown on the informal money transfer systems known as hawala and hundi.

According to the State Bank of Pakistan (SBP), the country received remittances amounting to $2.206 billion in September 2023, up from $2.094 billion in August 2023, equating to a $112 million rise.

The majority of remittance inflows for September 2023 were derived from several key sources, with Saudi Arabia contributing $538.2 million, the United Arab Emirates $400 million, the United Kingdom $311.1 million, and the United States of America $263.4 million.

This increase in remittances can be linked to the fact that a substantial number of Pakistani expatriates resorted to using the Hawala/Hundi channels during the initial two months of the fiscal year, largely due to a significant disparity between official and unofficial exchange rates.

Subsequently, strict enforcement measures against illegal currency dealers have curbed this volatility, leading to a gradual appreciation of the Pakistani rupee in both the interbank and open currency markets.

In the last month, the rupee has rebounded by 9 per cent, recovering from its record low of 307.1 against the dollar on September 5. The crackdown on these illicit currency dealers has also contributed to the 5 per cent month-on-month increase in remittances for September.

However, when examining the entire first quarter of fiscal year FY24, the overall home remittances to Pakistan have experienced a sharp decline of 20 per cent, totalling $1.57 billion. Home remittances for the July-September period of FY24 amounted to $6.33 billion, a decrease from $7.90 billion during the same period in the previous fiscal year, FY23.

During this initial quarter, remittances from all major sources displayed a downward trajectory. Specifically, home remittances from Saudi Arabia decreased by 22 per cent to $1.516 billion for July–September in FY24, down from $1.946 billion in the equivalent period in FY23.