The World Bank predicts that official remittance flows to the country will reduce further as a result of migrants’ preference for the parallel exchange market and unofficial channels of money transfer, which resulted in a 7.4% decline in remittances from $31 billion in 2021 to $29 billion in 2022.
In its most recent report, “Remittances Brave Global Headwinds Special Focus: Climate Migration,” the bank highlighted that although remittances were more than they were before the epidemic, they were lower than in 2021, worsening a balance of payments issue.
It went on to say that between January and September 2022, the value of the Pakistani rupee fell by 36% versus the dollar, and between January and July 2022, it fell by 14% against the currencies of its trading partners.
The government requested financial help from the IMF in order to fix the exchange rate as inflation raged and a balance of payments crisis appeared imminent.
The bank added that the decline in official remittance flows to Pakistan was a result of migrants’ choice for the black market for currency exchange and unofficial channels of money transfer due to their lack of confidence.
The unprecedented destruction caused by the floods in Pakistan provided the perfect incentive for migrants to increase official remittance flows in 2022, especially given the extremely attractive destination market circumstances in the GCC.
However, in 2022 they were numerous in contrast to the experience of the epidemic when informal networks had disappeared.
Pakistani migrants appear to favor unofficial remittance methods over official ones when helping their families back home.
The recent significant flood in Pakistan caused the displacement of roughly eight million people.
The floods have also had a significant negative impact on Afghan refugees residing in Pakistan.
Official remittance flows were further reduced in Bangladesh, Pakistan, and Sri Lanka as a result of the combined effects of parallel exchange markets brought on by domestic economic crises and the resurgence of informal money transfer routes following the epidemic.
To read our blog on “$2.8 billion remittances the highest amount ever received by Pakistan, SBP,” click here.