Remittances shield Pakistan from Trade Deficit in FY23

July 10, 2023 (MLN): During times of the political and macroeconomic challenges posed in Pakistan, Pakistanis abroad did not disremember their native land and continued to send remittances that helped bolster the repercussions of the trade deficit.

The latest figures from the State Bank of Pakistan and the Pakistan Bureau of Statistics (PBS) reveal Pakistan's trade deficit for the fiscal year 2023 (FY23) was almost entirely covered by the inflow of workers' remittances.

Workers' remittances in FY23 amounted to $27.02 billion, however, they recorded a 13.6% YoY decline as compared to $31.27bn in FY22.

Despite the decline, remittances were enough to offset the trade deficit.

Pakistan's trade deficit for FY23 (July-June) was $27.55bn compared to a deficit of $48.35bn from the corresponding period from FY22, showing an improvement in the trade numbers by 63.32% YoY.

The improvement in the trade balance was mainly driven by a sharp fall in imports due to strict import restrictions set by the government, which dropped by 31% to $55.29bn in FY23 from $80.14bn in FY22.

In the month of June alone, workers' remittances registered an inflow of $2.2bn on account of Eid-Ul-Adha holidays, compared to $2.1bn in May 2023, and $2.7bn in June 2022.

It is worth noting that during FY22, the trade deficit was more than 1.5x of workers’ remittances depicting that FY23 was a rare feat for Pakistan's economy as the deficit was almost entirely offset by remittances.

Monthly comparison of Remittances and Trade deficit

Copyright Mettis Link News