Daily Times

It is high time Pakistan started looking for ways to increase its revenues, instead of focusing on the transfer of funds from overseas. Once, it used to be a reliable source, but time tells us that the source may not be reliable in the future if data is to be observed. Remittances from overseas workers have been on the decline lately in Pakistan. In December 2022, the remittances fell to $2 billion (down 19 percent YoY). Since he was appointed finance minister on September 28, 2022, Dar has been outspoken about how the rupee is undervalued, which has led to an increase in the disparity between interbank and open market rates as well as the emergence of a new rate on the black market because of a lack of dollars. Following the appointment of Dar, remittances decreased by 16% year over year to $6.4 billion in October and December of 2022. Workers’ remittances reached $31 billion in FY22, or 8% of GDP, ranking among the highest in the area. Remittances were a significant source of foreign exchange for Pakistan in FY22, along with $32 billion in exports, therefore, the drop in remittances is a serious worry.

The widening gap between the dollar’s interbank rate and recent open market/black market rates is mostly to blame for the drop in remittances. One of the main causes of the dollar scarcity is that, in accordance with the most recent SBP regulation, exchange operators must now relinquish 100% of inbound remittances in the interbank market. The official rate that banks use for transactions with other banks as well as for import and export is known as the interbank rate. This was as low as Rs240 until Dar announced an investigation against the banks over currency speculation and started administrative measures to maintain the official exchange rate. It is currently hovering around Rs228 versus the US dollar. When travel documents are shown, local exchange companies will give you access to their money, but there are buying restrictions. The black market is expanding since exchange companies are subject to limitations and there is no need for paperwork there.

The black market price of the dollar is currently between Rs260 and Rs265, which is a 15% to 20% premium above the interbank rate. Even though previously, as in the case of Pakistan, the gap between banks and open/black market rates grew, it had an effect on the migrants’ transfers. *