LAHORE: Pragmatic steps by the Pakistan government, including curb on illegal foreign-exchange trade, has boosted country’s foreign exchange reserves to a record high this fiscal.
The news website Bloomberg quoted the State Bank of Pakistan (SBP) data in its report on Pakistan that remittances from the overseas Pakistanis to their families rose 34% to $14.8 billion in the first five months of the current financial year 2024-25 from a year ago.
The increase in remittance was the result of government’s crackdown on unofficial buying or selling of dollars as people started using the official banking channels for the purpose. The government’s action helped raise foreign exchange reserves to above $12 billion by November-end, the highest since March 2022.
It may be noted that the government had launched the crackdown against illicit dollar market and hoarders in September 2023 after reports of flight to greenback from the country. The Federal Investigation Agency (FIA) raided offices of currency dealers, arrested people and also deployed officials in plain clothes at money exchanges in its efforts to curb illicit trade.
Finance minister Muhammad Aurangzeb hopes that the government’s strategy will help increase remittances to an all-time high of $35 billion this year from $30 billion last year.
“The currency reforms do seem to have boosted remittances,” Bloomberg reported John Ashbourne, emerging-market economist at BMI, a Fitch Solutions company in London, as saying.
In Ashbourne’s opinion “the increase might be because remittances that had previously been sent using the black market are now being sent via official channels.”
The surge in remittances have helped Pakistan to fill coffers with foreign exchange that reduce a major economic vulnerability that pushed the country to the brink of a default last year.
Pakistan has been implementing tough economic measures on the International Monetary Fund’s guidance and secured a $7 billion loan in September.
Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan told the website that “negative currency trading has declined significantly,” adding that the illegal dollar-trading market has fallen at least 20% in the past two years.
According to his assessment, as much as $10 billion were routed through the formal banking channels.
Meanwhile, Pakistani rupee strengthened against greenback 2% this year and is among the best-performing emerging-market currencies, helped by the IMF loan and remittances.
