The IMF has already asked Pakistan to rein in its swelling CAD, which is under pressure due to soaring commodity prices, including oil.
Data from Pakistan (SBP) showed remittances in May amounted to $2.3 billion, up from $2.5 billion in the same month a year earlier. Remittances came mainly from Saudi Arabia, the United Arab Emirates, the United Kingdom and the United States.
Remittances are an important source of foreign exchange inflows, boosting overall economic growth. If the trend continues, it could even lead to an aggravation of the balance of payments crisis, pushing inflation further.
A press release issued by SBP indicates that in terms of growth, remittances decreased by 25.4% on a monthly basis, while the decline of 6.9% on an annual basis, “reflects in much of the usual seasonal dip after Eid and the associated long holidays. .”
Analysts said this could reflect greater malaise in the economy. “Although the country’s central bank has said this is a post-Eid trend, it is something that will be monitored in the coming weeks. Growing political instability is a cause for concern and it remittances may have slowed because of this,” an analyst told India Narrative.
Many Pakistani watchers have taken to social media, including Twitter, to voice their concerns over the slowdown in remittances.
“Remittances declined to just $2.3m in May, down 25% from last time. People have stopped sending money to Pakistan under this import regime “, tweeted Muzzammil Aslam, Pakistan Tehreek-e-Insaaf (PTI) spokesperson for the economy.
Ratings agency Moody’s has now downgraded Pakistan’s outlook from ‘stable’ to ‘negative’, saying the country’s CAD will continue to come under pressure in 2022-23 amid high commodity import bills .
Some of the remittances, however, may have entered the country through informal channels.
Cumulatively, data from the country’s central bank showed that at $28.4 billion, remittances rose 6.3 percent year-on-year in the first 11 months of this fiscal year.