in

Remittances Inflows from GCC Countries Continue to Slow Down

The remittance inflows from overseas Pakistanis in Gulf Cooperation Council (GCC) countries continued to fall, showcasing a 16.5 percent year-on-year (YoY) drop amid the changing economic situation in the region and the prevalence of informal channels.

According to the data released by the State Bank of Pakistan (SBP), remittances from six Gulf states decreased to $13.1 billion in 11 months of the outgoing financial year of 2022-23 as compared to $15.7 billion recorded in a similar period of the financial year 2021-22, showing a whopping decline of $2.6 billion in almost a year.

CountryFY23FY22Decline
Kingdom of Saudi Arabia$5.92 billion$7.07 billion16.3%
UAE$4.32 billion$5.34 billion19.2%
Oman$921 million$1.03 billion10.8%
Qatar$838 million$933 million10.2%
Kuwait$742 million$849 million12.6%
Bahrain$416 million$483 million13.8%
Rise in Informal Channels

The restoration of cross-border air travel may have shifted some remittance inflows to informal routes, as blue-collar workers (especially from Saudi Arabia and the UAE) rely heavily on personal networking to send money home.

According to a recent SBP analysis, the government’s withdrawal of the incentive to banks (20 SAR rebate as a remittances charge on remittances originating in KSA) may have also diverted some inflows to informal channels.

The World Bank’s data on remittance pricing also shows a modest increase in exchange rate margins charged by money transfer operators (MTOs) and exchange companies in Saudi Arabia and the United Kingdom, discouraging workers from using formal channels for remitting to Pakistan.

The disparity in exchange prices between the open and interbank markets also enticed ex-pats and their relatives to earn margins by sending remittances home through informal routes.

Inflation and Employment Policies

Inflows of remittances during the first 11 months of the financial year 2022-23 experienced a decline attributed to the impact of high inflation and evolving employment policies in host countries.

For example, Saudi Arabia adopted a policy that citizens are prioritized over expatriates for white-collar jobs.

It has also been reported that the present property boom in the UAE (especially in Dubai) may have been an incentive for the Pakistani diaspora to keep their funds in the UAE in the form of real estate investments rather than remitting to Pakistan amid uncertain economic conditions.

Meanwhile, inflows of remittances from the UK dropped by 8 percent in FY23 to stand at $ 3.7 billion and the EU by 7.7 percent to stand at $2.8 billion, according to SBP data.

Overall, remittances sent by Pakistanis living abroad fell to $24.8 billion in FY23, down from $28.4 billion in the same period of FY22, a reduction of $3.6 billion or 12.8 percent YoY.

KSA, UAE, UK, and USA are the top four host nations accounting for roughly 70 percent of total remittances. It bears mentioning that inflows into Pakistan have historically been equal to the foreign exchange receipts attracted by the country’s export earnings.

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

    Xiaomi Mix Fold 3 Launch Date Unveiled

    Peugeot Announces Another Huge Price Hike