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| Why are overseas Pakistanis sending less money to their country now? |
"I still feel the same about my family as I did a year ago, but now I don't need to send much money to Pakistan." If I send two, two, and a half hundred pounds now, they become almost as much Pakistani rupees as a year ago when I sent four hundred pounds. The depreciation of the Pakistani rupee over the past year has made things a little easier for me and if I send even fewer pounds, my family back in Pakistan is supported.
Umar Kareem has been living in the UK for the last four years for employment and he explained the reason for sending less money to his family in Pakistan from the UK than in the past.
Like Umar Karim, Muhammad Mazhar has been living in the United Arab Emirates for some time now and he also supports his family in Pakistan. Mazhar says that he has sent less money to Pakistan during the last year because, looking at the economic conditions of Pakistan, he believes that the rupee will continue to depreciate against other currencies, so it is better if a little longer you wait, the more money you will get.
As the situation has been after the departure of Imran Khan's government, many people like me are sending less money to Pakistan even thinking that the rupee will fall further, so why harm yourself by sending money at such a time. Let's wait a little, we will get more money.
At a time when Pakistan's economy seems to be stagnating, with no sign of a renegotiation of the agreement with the IMF, the dollars held by the State Bank are only enough for one month's imports while the end of June 2023. Pakistan also has to make external payments of 3.7 billion dollars, while at the same time, there has been a decrease in remittances to Pakistan by Pakistanis living abroad.
According to the data released by the State Bank of Pakistan, in the first ten months of the current fiscal year, remittances have recorded a 13 percent decrease compared to the previous fiscal year. In the first ten months of the last financial year, remittances were 26.1 billion dollars, which has decreased to 22.7 billion dollars in the same period this year.
According to experts, this decrease in remittances is pointing to a further increase in economic difficulties in Pakistan in the coming days.
But the question is, what are the reasons based on which overseas Pakistanis are now sending less money to the country?
Record depreciation of the rupee and uncertain political situation
Journalist Shehbaz Rana, who reports on economic affairs, believes that due to the continuous decline in the value of the rupee, not only Pakistanis living abroad have sent less money to Pakistan, but the uncertainty about the value of the rupee that is still being felt is that the coming It can also lead to more problems within days.
Pakistanis living abroad have been seeing for the past few months that the rupee is continuously depreciating and it is rumored that this trend may continue. Therefore, they are reluctant to send money to Pakistan because the uncertainty about the value of money is still there. No one can say with certainty where the depreciation of the rupee will stop in the coming days and this uncertainty is one of the main reasons for the decline in remittances.
Dr. Hafsa Hina works as an Assistant Professor at Pakistan Institute of Development Economics. According to him, apart from the economic situation, the prevailing political uncertainty in the country is also one of the main reasons for the decrease in remittances.
Overseas Pakistanis also send money to invest in Pakistan, most of which goes to the real estate market (property business). But with the political situation for the last year, I think that instead of investing in Pakistan, overseas Pakistanis have started investing in other markets like the UAE.
Differences between open market and interbank rates
According to Shahbaz Rana, another major reason for the decrease in remittances at the moment is the difference in the dollar rate in the open market and interbank.
During the last year, there has been a significant difference in the dollar rate in the open market and interbank and the main reason for this is that the current finance minister started artificially controlling the dollar rate in the country as soon as he took office. And this process continued for several months. In such a situation, people started sending their money to Pakistan only through the reference and handi because they were not getting the money that was available in the handy reference for the dollars sent legally. This is one of the reasons why the amounts sent by Pakistanis abroad through unofficial sources are not visible in the State Bank's data.
This was also confirmed by Muhammad Mazhar, based in UAE, that due to the huge difference in the exchange rate, he had been sending money to Pakistan through Handi. It is obvious that money is getting good in the open market, that's why reference, handi has to be used. Who would want to work hard all day here in a foreign country?'
Hamza Khan lives in Karachi and works as a freelancer. Until recently, all the money for whatever work he was doing came in the form of dollars in his Pakistani bank account, but now he has registered his company in the UAE and all his payments are made there. coming into the bank account from which they are only ownOnly some money is transferred to the Pakistani account for this requirement.
"Until last year, I was getting paid in dollars from a Pakistani bank for all the work I was doing as a freelancer, which I was losing," he says. The inter-bank dollar rate in Pakistan was being artificially controlled and I was not getting the actual dollar rate.
Second, as a freelancer, all my expenses are in dollars. I have taken many subscriptions for my work which are paid in dollars. When I go out for work, I make all payments in dollars. I used to have a loss while withdrawing money from a Pakistani bank against dollars and also had a loss while making payments. So now I am not bringing all my money to Pakistan.
On the other hand, according to Mohammad Mazhar, not only the difference in the dollar rate is the reason for reference handy, but the documentary requirements for sending money through Pakistani banking channels are also the reason for using reference handi.
'Hawala, Handi does not require any kind of documents to send money to Pakistan through banking channels. Second, if you send money to Pakistan through Handi, then the family gets the money immediately, while the banks take time to give the money.
Decrease in the number of Pakistani workers in the Gulf countries
Remittances this year are $3.4 billion lower than in the first ten months of the previous fiscal year, with the largest share of the decline coming from the Middle East, namely Saudi Arabia and the UAE. According to the statistics of the State Bank of Pakistan, the remittances from these countries this year were 2.5 billion dollars less than last year.
According to Dr. Hafsa Hanna, it is true that people from these countries are sending money through remittances due to the exchange rate and banking procedures, but it also has to be seen that after the corona epidemic, they will be able to work in UAE and Saudi Arabia. What is the number of Pakistanis?
Before the corona epidemic, in 2019, around five and a half lakh Pakistani workers were working in these countries, but due to the global epidemic, when employment opportunities around the world decreased, many Pakistanis also left their homeland due to the loss of jobs. had returned. And in April this year, this number has become around one hundred thousand. This is also one of the reasons why remittances are decreasing.
Are global conditions also responsible for this?
Due to the war between Ukraine and Russia, a wave of inflation was seen all over the world, so could this be a reason why Pakistanis living in the UK and EU countries have sent less money to Pakistan this year?
Dr. Hafsa Hanas believes that the kind of inflation these countries have seen this year must also have some part in reducing remittances. Britain has broken a 50-year inflation record and evidently, Pakistanis living there are having to spend more to meet their daily expenses, and this has led to a decline in remittances from the UK and the EU. Is.'
According to the official statistics, there has been a decrease of about five hundred million dollars in remittances coming to Pakistan from the United Kingdom and the European Union.
According to economic experts, there is an encouraging increase in remittances from abroad in March and April this year compared to the previous few months, but it remains to be seen whether this trend continues regularly or this increase. It happened only because of the festival of Eid al-Fitr.
Economists believe that in the current economic conditions of Pakistan, every dollar has become very important for Pakistan because there are only 4 billion 38 million dollars in reserves in the country's treasury and two months to pay foreign debts. I have to pay three billion 70 million dollars. In such a situation, due to a reduction in remittances, Pakistan may face serious difficulties in ensuring these payments and meeting the trade deficit.
According to economists, to increase remittances, the government needs to work not only on reference, and handi but also to bring political stability so that along with economic stability, the value of the rupee will also be stable, which will help Pakistanis abroad. Confidence can be restored and remittances can increase.