Business

Remittances fall in July-Aug as Pakistani expats prefer illegal channels

Published

1 year ago

Farwa

Pakistan receives $4.12bn in two months.
Remittances fall 24% YoY to $2.09bn in August.
Decline mainly due to large currency gap, say analysts.

KARACHI: The workers’ remittances to Pakistan steeply declined by 22% in July-August as the expatriate workers chose informal channels to send funds amid a widening gap between official and unofficial exchange rates, The News reported Tuesday.

The country received $4.12 billion in remittances — a key source of foreign exchange — from July to August, down from $5.29 billion in the same period last year, according to data from the State Bank of Pakistan (SBP).

In August alone, remittances fell 24% year-on-year to $2.09 billion but rose 3.1% month-on-month.

Analysts said the decline was mainly due to the large difference between the interbank and grey market rates, which reached as high as 10% last month, encouraging many expatriate Pakistanis to use unregulated methods such as hawala and hundi to transfer funds.

Another factor was a drop in inflows from Roshan digital accounts, a scheme launched to attract foreign currency deposits from expats.

Between July and August FY2024, remittances from Saudi Arabia decreased by 23% to $977 million. Inflows from the United Arab Emirates (UAE) fell by 37% to $624 million and the United Kingdom by 18% to $638 million.

In July-August FY2024, Pakistanis residing in the United States (US) remitted home $504 million, down from $545 million the previous year.

“The main reason for the fall in remittances compared to last year is the large disparity between interbank, open market and grey market rates,” said Tahir Abbas, head of research at Arif Habib Limited.

“While remittances transferred through interbank declined, the amount sent through unauthorized routes surged.”

Abbas said that a staff-level agreement on policies to conclude the combined 7th and 8th reviews of the Extended Fund Facility (EEF) between the International Monetary Fund (IMF) and the Pakistani authorities had resulted in an appreciation of the rupee and a narrowing of the interbank and black market rates.

That resulted in the country receiving $2.7 billion in remittances in August 2022, a significant amount.

He explained that after the IMF’s board approved the disbursement of over $1.1 billion to the cash-strapped economy in August of last year, the rupee strengthened and appreciated from 239 to 219 against the dollar in the interbank market. As a result, there was a high flow of remittances during that time as Pakistani employees abroad sent home more money through formal means.

Abbas expects an improvement in remittances in September as the rupee strengthens following the government’s recent crackdown on illegal dollar traders, hoarders, and black marketers.

The rupee gained 2% against the dollar over the past four trading days, closing at 301.16 in the interbank market on Monday. The gap between the interbank and open market has narrowed from peaks of over 8% due to regulatory measures and enforcement from law authorities.

Fahad Rauf, head of research at Ismail Iqbal Securities, said remittances should pick up now that the interbank and grey market gap has been reduced. For Pakistan, which has been grappling with high inflation, dwindling foreign exchange reserves, a weak currency and a deteriorating balance of payments position, the slump in remittances is not a good sign.

The country’s reserves held by the central bank dropped by $70 million to $7.8 billion in the week ending September 1. The country also saw a current account deficit of $809 million in July against a surplus of $504 million in June.

Business

Gold prices in Pakistan approach an all-time high.

Published

19 hours ago

Farwa

Following a substantial surge the prior day, gold prices in Pakistan are ascending to unprecedented levels with an additional gain on Thursday, coinciding with a rise in global precious metal rates.

The price of 24-karat gold in the local market rose by Rs700 per tola, reaching Rs277,900, as reported by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

Likewise, the cost of 10 grams of 24-karat gold increased by Rs600, currently priced at Rs238,254.

Globally, gold prices exhibited an upward trend, increasing by $7 throughout the day. The APGJSA reports that the international gold price was $2,682 per ounce.

Notwithstanding the increase in gold prices, the silver market exhibited stability, with the price of silver maintained at Rs3,050 per tola.

In the previous month, gold prices in Pakistan reached an unprecedented high of Rs 277,000 a tola, driven by substantial gains in the worldwide market.

Business

World Bank: Power industry subsidies soar by 400% in just five years.

Published

20 hours ago

Farwa

Ninety-four percent of domestic customers will benefit from the budgetary subsidy in 2024, according to a World Bank report, which credits the increase in protected consumers with contributing to the weight of subsidies.

In the current fiscal year, the electricity sector subsidy has increased by an astounding Rs. 954 billion, from Rs. 236 billion in the 2020 fiscal year to Rs. 1190 billion.

Notwithstanding changes, the circular debt has averaged Rs. 400 billion yearly over the last four years due to the incapacity to minimize losses and inadequate recovery of electricity payments.

According to the World Bank, the government must solve the fundamental problems in the power industry in order to lower the burden of subsidies and circular debt, as rising electricity prices and inadequate tax collection will only serve to worsen the circular debt crisis.

The rise in Pakistan’s power sector circular debt has raised worries from the World Bank (WB) despite an unprecedented increase in energy pricing.

Within the last six years, the debt has grown by 1241 billion rupees, according to the World Bank’s study. Between 2019 and 2021, the debt climbed by 1128 billion rupees.

The electricity sector’s circular debt has been increasing at an alarming rate, according to a World Bank analysis. Between 2022 and 2024, there was a substantial increase of 113 billion rupees.

Pakistan’s electricity industry has 2393 billion rupees in total circular debt as of 2024.

Restructuring is required to solve the circular debt issue, according to the World Bank.

Business

Final settlement: Govt to pay five IPPs Rs 72 billion.

Published

20 hours ago

Farwa

On October 10, Prime Minister (PM) Shehbaz Sharif declared that the agreements with five IPPS would be terminated in the first phase. Sources claim that the government will give Rs 15.5 billion to Rousch Power and Rs 36.5 billion to Hubco.

In a same vein, the federal government would pay Lalpir Power Rs 12.8 billion, Atlas Power Rs 15.5 billion, and Sapphire Power Rs 6 billion.

The sources state that late payment fees are not included in the settlement. With effect from October 1, the agreements with the five IPPs will be considered officially ended.

PM Shehbaz earlier remarked that the termination was carried out with the owners of the IPPs’ mutual permission while presiding over the federal cabinet meeting in Islamabad.

The Prime Minister notified the Cabinet that the only money that will be paid, interest-free, to these IPPs is the outstanding balance.

According to him, the national exchequer will gain over 411 billion rupees from the termination of these contracts, while power customers will save roughly sixty billion rupees.

According to Prime Minister Shehbaz Sharif, it was the result of the arduous teamwork of the entire government. In this regard, he also acknowledged the contributions and assistance of the associated parties. He specifically mentioned General Asim Munir, the Chief of Army Staff, who showed a personal interest in the situation.

The prime minister characterized the development as the start of a trip that will ultimately lead to the advancement and prosperity of the populace.

PM Shehbaz Sharif also brought up the assistance that the Punjabi and Federal governments gave to power users over the summer.