Measures against illegal dollar trade boosted remittances: report

Pakistan’s clampdown against the illegal foreign-exchange trade have significantly improved remittances, Bloomberg reported on Tuesday.

Remittances rose by 34 per cent to $14.8 billion in the five months through November from a year ago, the report said, citing the State Bank of Pakistan (SBP)’s data.

Additionally, it noted that rupee had gained 2pc this year and is considered “among the best-performing emerging-market currencies”, propelled by the International Monetary Fund (IMF) loan programme and remittances.

Previously, Finance Minister Muhammad Aurangzeb had also talked about increasing remittances in high spirits. He had said the country expected about $35bn inflows through remittances during the current fiscal year.

Pakistan received $11.85bn remittances during July-Oct, making an average of $2.962bn per month. The country received $3.052bn in October and $2.859bn in September, showing a higher trend of remittances.

The country received $30.25bn in FY24, witnessing a decline of 13.3pc compared to the preceding year.

“The currency reforms do seem to have boosted remittances,” said John Ashbourne, emerging-market economist at BMI, a Fitch Solutions company in London, told Bloomberg, adding that the increase might be due to more remittances now being sent via official channels.

Financial experts believe the higher remittances result from exchange rate stability and a crackdown against illegal trading of currencies.

The report also highlighted that the country has been implementing tough economic measures under the IMF’s guidance.

“The crackdown on the unofficial dollar trading may have helped move some of the transactions to the official banking channels,” Bloomberg noted, adding that it “contributed to foreign-exchange reserves rising to over $12 billion by end-November, the highest since March 2022”.

“The Federal Investigation Agency raided offices of money changers, arrested people and also deployed security officials in plain clothes at money exchanges in its efforts that started over a year ago,” the report added.

Meanwhile, Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan, estimated that the size of the illegal dollar market had fallen at least 20pc in the past two years, with as much as $10bn going into formal banking channels.