Business

Illegal channels: Pakistan’s remittances fall 19% to $2bn in Dec

Published

1 year ago

Farwa

Remittances decline 11% to $14.052 billion in first half of FY23.
Fall recorded mainly owing to mushrooming of grey transactions.
Inflows from Saudi Arabia fall 18% to $516.3 million in December.

KARACHI: Overseas workers’ remittances flowing into Pakistan dropped 19% in December to $2 billion from $2.52 billion recorded in the same month 2021, the central bank said on Friday, mainly owing to mushrooming of the grey transactions.

The remittances received during the July-December period of FY23 fell 11% to $14.052 billion from $15.807 billion in the first half of FY22, the State Bank of Pakistan (SBP) said.

Month-on-month, the inflows sent home by the Pakistani diaspora working abroad decreased by 3.2% to $ 2.108 billion in November 2022.

Arif Habib Limited (AHL), in a recent note, said a key risk that had emerged in the current account in recent months was the deteriorating trend in remittances.

The brokerage said that a sizeable gap (10-12%) between the official and unofficial exchange rates amid administrative measures undertaken by the SBP was the major reason for the declining official remittances trend, with rising flows via unofficial channels.

“We believe such a large gap between the two rates is unsustainable and counterproductive to the successful negotiations on the 9th review, which is a likely catalyst for things to normalize in the exchange markets.”

During Dec 2022, workers’ remittances recorded an inflow of US$2.0 billion. For detail see https://t.co/rPOvn9Dr8N https://t.co/7XBd4uOcHC pic.twitter.com/wxEZKq9zbk
— SBP (@StateBank_Pak) January 13, 2023

The AHL report added that this trend was also evident from the sharp decline in official remittances. “We estimate, the country losing around USD 150-200mn monthly flows due to the artificial gap in official and unofficial rates,” the brokerage said.

Remittances from Saudi Arabia, despite being the largest contributor, fell 18% to $516.3 million in December 2022 compared to $626.8 million sent in the same month of the previous year.

Inflows from the United Arab Emirates (UAE) declined 27% to $328.7 million from $453.2 million in December 2021, according to the central bank.

Pakistan’s central bank forex reserves have plunged to the lowest level since February 2014 after a decline of 22.11%, posing a serious challenge for the country in financing imports.

The announcement came at a time when the country is in dire need of foreign aid to reduce its current account deficit as well as ensure enough reserves to meet its debt obligations.

Coupled with another $5.8 billion held by commercial banks, the nation has $10.2 billion in reserves — which barely covers three weeks of imports.

Illegal channels: Pakistans remittances fall 19% to $2bn in Dec

During the week ended on January 6, the central bank’s forex reserves fell $1,233 million, or 22.12% to $4,343.2 million, a statement from the central bank said, down from last week’s reserves of $5,576.5 million.

Pakistan’s economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, but devastating floods and a global energy crisis have worsened the situation.

Despite recent compression measures by the government, Pakistan’s import bill for goods was $5.1 billion per month in both November and December, according to the country’s statistics bureau. Its main imports are critical energy-related fuels.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

2 days ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

2 days ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

2 days ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures were down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.