SBP rebuts dollar rate capping caused $3bn loss in remittances, exports

SBP rebuts dollar rate capping caused $3bn loss in remittances, exports

KARACHI (Web Desk) - The State Bank of Pakistan (SBP) has refuted the claim or reports that capping the price of the US dollar triggered loss of $3 billion in remittances and exports.

The central bank termed the rumours incorrect owing to a number of factors.

Explaining its point of view, the SBP spokesman says first export of goods have been facing headwinds due to moderating demand in the international markets as most of our major trading partners are going through a period of monetary tightening.

For example, the US Federal Funds rate has surged from 0.25 per cent in March 2022 to 4.5pc to date; suggesting a noticeable global monetary tightening. Meanwhile, inflation has been significantly higher in developed world, eating into the purchasing power of consumers.

These, together with domestic factors like devastating floods and ensuing supply disruptions, have negatively impacted exports. In this backdrop, linking decline in exports to relatively stable exchange rate is not appropriate.

Second, workers’ remittances were gradually tapering off from all time high level of $3.1 billion achieved in April 2022 due to Eid-related flows. This decline is primarily attributed to global economic slowdown as higher inflation in developed countries has led to higher cost of living abroad, thus reducing the surplus funds that could be sent back to homeland as remittances.

Moreover, with the resumption of international travel post COVID, some remittances have switched back to FCY cash transfers via overseas Pakistanis travelling to Pakistan.

According to the central bank, the decline in Pakistan’s exports and remittances is a result of numbers of exogenous factors and domestic reasons and it wouldn’t be appropriate to ascribe it to exchange rate only.