Pakistan lost $8.3 billion in remittances and exports in FY23 due to an attempt to secure an IMF bailout

Earlier this week, the International Monetary Fund deposited a much-anticipated first installment of $1.2 billion with the central bank of Pakistan. The cash injection was part of a new $3 billion bailout package the beleaguered country completed earlier this month after making a series of changes to meet conditions set by the IMF. However, recent reports suggest that Pakistan suffered a massive $8.3 billion loss in remittances and exports in the last fiscal year.

According to a Dawn report, the Shehbaz Sharif-led government had made extensive efforts to placate the IMF since taking power in April last year. The lack of attention to these two major inflows has resulted in the country losing significantly more than it has received from IMF loans and inflows from other sources.

Simply put, Pakistan received a nine-month, $3 billion loan package for FY24 in exchange for a massive tax burden, historically high interest rates, and record inflation and currency devaluation in FY23.

“Despite the monthly drop in remittances, the government remained busy lending to the IMF while losing non-binding interest-free inflows. Attention was needed to reverse the bearish trend, but it seems borrowing was more important,” Atif Ahmed — a forex trader and interbank market expert — told the publication.

Remittances reportedly fell 13.6% — from $31.278 billion in FY22 to $27.024 billion last year. Non-interest inflows also declined as the government continued to focus on IMF funding. The growth trajectory was lost in FY23, although more than a million Pakistanis left the country to work mainly in the Middle East. Inflows from expatriates fell even below the $29.449 billion the government received in FY21. It had previously risen by a record $6.317 billion from $23.132 billion in FY20.

At the same time, exports started falling and eventually ended with a 12.7% decline to $27.74 billion compared to $31.78 billion a year earlier, for a net loss of $4.04 billion .

The two declines resulted in a cumulative net loss of $8.294 billion. The volume represents almost 30% of exports recorded in FY23.

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