APBF asks govt to take steps to fill growing divide of interbank, open market dollar rate
ISLAMABAD
The All Pakistan Business Forum has said that amidst widening gap of dollar-rupee parity between interbank and open market the straight drop in the workers’ remittances’ inflows for the fourth consecutive month has further hit the country’s forex reserves, plunging to a 31-month low at $2 billion last month.
APBF President Syed Maaz Mahmood observed as the inflows of workers’ remittances sent home by overseas Pakistanis have continued to slow down the government should announce attractive package for overseas Pakistanis to enhance the volume of foreign inflows, besides taking special initiatives to bridge the growing divide of interbank and open market rate, as this is the only hope which can support the country’s account balance.
He said that declining remittances will increase Pakistan’s reliance further on expensive foreign loans to finance external expenditures, as almost all the multilateral and bilateral creditors have linked providing the required loans with the revival of Pakistan’s stalled International Monetary Fund loan program.
Referring to the State Bank of Pakistan data, he said that cumulatively in the first six-month (July-Dec) of the current fiscal year 2022-23, workers’ remittances have dropped 11% to $14 billion compared with the same period of the last year. The remittances had decreased by 19% to Rs2.04 billion in December, compared with $2.52 billion in the same month of the previous year. The inflows have reduced by 3% in the month compared with $2.10 billion received in November 2022.
APBF Chairman Ibrahim Qureshi said a major reason for deceleration in the inflows was that Pakistani expatriates had switched to informal channels to send funds to their families in the country instead of banks. The offer of a better price by illegal hawala-hundi operators at Rs260 per dollar, compared with Rs227 per dollar in the interbank market, has compelled a section of non-resident Pakistanis to send funds through informal channels.
Ibrahim Qureshi noted that the inflows had remained stable from the Western parts of the world including the US and UK, which were facing a recession-like situation. However, the inflows from the single largest workers’ remittances market for Pakistan i.e. the UAE have dropped by a significant 13% to $329 million in Dec compared with $378 million in the previous month of November.
Maaz Mahmood said the rising political instability in Pakistan was not allowing the government to focus on the worsening economic situation in the country including the widening gap in rupee-dollar exchange rate in the two markets. The volume of workers’ remittances would slip below $2 billion in the following months if the issue of exchange rate is left unaddressed. The world has offered close to $10 billion in flood relief to Pakistan this week. However, multilateral and bilateral donors are waiting for revival of the IMF program for Pakistan to dispatch the funds.
The revival of the IMF loan program is also associated with the rising political unrest in the country. Political stability would allow the government to fulfill commitments made with the IMF to resume the loan program. This would help remove the black currency market and re-attract Pakistani diaspora for formal markets, he added.
Syed Maaz Mahmood said that foreign remittances flows are the only hope which can support the country’s account balance amidst low volumes of foreign direct investment and slow growth of exports.
The APBF President called for incentives to escalate foreign remittances, besides enhancing investment in the country by Pakistani expatriates, which can play a pivotal role in boosting the economy of Pakistan. He said that if the government assists overseas Pakistanis and provides them with incentives, they can play a pivotal role in boosting Pakistan’s economy through their remittances and investments for the socio-economic prosperity of the country.
He observed that the drop in the inflows from the UAE via formal channels was apparently seen because of a shift of a section of Pakistani expatriates to informal channels including the illegal hawala/hundi. The drop from the UAE is surprising considering that the Emirates’ economy has continued to flourish. Thousands of Pakistanis are finding jobs there every month, he added.
