September remittances improve slightly but lower than expected.

Remittances for September came in at $2.21 billion, according to data shared by the State Bank of Pakistan (SBP) on Tuesday. This figure, while an improvement from last month's $2.09 billion, was significantly lower than market expectations of $2.4-2.5 billion.

On a month-on-month basis, remittances rose by 5.3%. However, they declined by 11.24% compared to last year, when remittances stood at $2.49 billion.

The market was expecting remittances to improve following a massive crackdown on exchange rate manipulation in the open market, and the subsequent reduction in the premium between the open and interbank markets.

Rupee's appreciation

Pakistanis abroad may choose to send remittances through banks, in which case they would become part of the interbank market, or exchange companies, which are part of the open market. Typically, the difference in the rates of the two markets is not very large; under the agreement with the International Monetary Fund (IMF), it cannot exceed 1.25% for more than five days.

However, between August 28 and September 4, the difference in the market rates widened to an alarming extent both in absolute and percentage terms - up to nearly Rs 30 per dollar or 8.5%. And before the crackdown was launched in early September, a significant number of foreign exchange dealings, including remittances, were either being done 'off the books' in the open market or diverted to the grey market, General Secretary of the Exchange Companies Association of Pakistan (ECAP) Zafar Paracha told Profit in an interview last month. It all changed, however, once the authorities launched a massive crackdown on...