KARACHI: Remittances sent by overseas Pakistanis declined to $2.4 billion in September as the open and grey markets were offering much higher rates than interbank.

The State Bank of Pakistan (SBP) on Tuesday said remittances decreased by 10.5 per cent month-on-month and 12.3pc year-on-year in September. The inflows in August were $2.72bn while they were $2.78bn in September 2021.

The central bank said that with the cumulative inflow of $7.7bn during July-September, the remittances decreased by 6.3pc as compared to $8.19bn in the same period last year.

Currency dealers said the real cause of low remittances during September was the difference in dollar rates in the official and illegal markets.

Inflows drop 6.3pc to $7.7bn in first quarter of FY23

“The open and interbank markets offer almost the same rate.

There isn’t any significant difference in the dollar rates as far as the kerb market is concerned,” said Malik Bostan, chairman of the Exchange Companies Asso­ci­ation of Pakistan.

However, the grey market which played a key role in escalating the dollar price still offers at least 5pc more than the interbank rate. When the dollar reached a peak in August at Rs240 in interbank, the open market was offering Rs246 while the grey market rate was even higher than Rs250.

The currency dealers believe that the $300 million in September was either remitted through the illegal hawala money transfer system or partially used to make payments in Dubai. The inflow in September was $300 million less than August’s $2.7bn.

“The dollar’s Kabul rate is still higher by Rs10 per dollar compared to the rate in Pakistan reflecting the situation. Pakistanis are paying dollars in Dubai to import coal from Kabul while the agreement was to make payments in rupees to Afghan coal exporters,” said Mr Bostan.

He said some importers were involved in making payments outside the country either in dirhams or dollars. This foreign exchange should come into Pakistan through the banking channel, he said.

“Remittances had decre­ased from formal channels due to the large spread between the interbank and open market rate, which reached Rs10-12. As the gap now has reduced the remittances from formal channels have now increa­sed,” said an analyst.

Remittances from all important destinations sho­w­ed a decline in the first quarter (July-September) of FY23. The highest inflow was from Saudi Arabia with $1.88bn, a fall of 9.8pc compared to the same period last year.

The only significant improvement in remittance was from the United States as it increased by 7pc to $817m.

The inflows from the UK fell by 4.2pc to $1.089bn, from the UAE dipped by 8.7pc to $1.462bn, from the GCC countries fell by 4.1pc to $877m and from EU countries dropped 7.7pc to $829m in July-September.

Published in Dawn, October 12th, 2022