Pakistani rupee continues to weaken against the UAE dirham, hitting a nearly three-month low due to political and economic uncertainty, dwindling foreign exchange reserves, falling remittances and a high trade deficit.
The South Asian country has been witnessing political and economic turmoil since April 2022 as the government and opposition have locked horns over different issues.
The rupee was quoted at 62 against the UAE dirham (228.15 against the US dollar) at the exchange houses in the country over the weekend. While online foreign exchange website XE was quoting the rupee at 62.12 on Sunday morning. It was trading at the same rate in the first week of October 2022.
The South Asian currency is still below its all-time low of 65.3 hit in late September 2022.
According to the State Bank of Pakistan’s latest data, workers’ remittances dropped 3.2 per cent month-on-month and 19 per cent year-on-year to $2 billion (Dh7.34 billion) in December 2022.
Reaching $14.1 billion in the first half of the 2022-23 fiscal year, the remittances are down by 11.1 per cent compared to the same period last year. Remittances inflows during December 2022 were mainly sourced from Saudi Arabia ($516.3 million), UAE ($328.7m), the UK ($314.2m) and the US ($230.5m).
Pakistan’s trade deficit during July-December 2022 stood at $17.13 billion compared to $25.43 billion in the same period last year.
68.5 versus in the open market
The UAE dirham and US dollar are trading much higher in the open market in Pakistan and this is reflected in the hawala system as well. The rupee was trading at 68.5 against the UAE dirham or 236.25 against the US dollar through the hawala system.
Hawala is a traditional system of transferring money whereby the money is paid to an agent who then instructs an associate in the relevant country or area to pay the final recipient. As a result of these transactions, no record is maintained, hence, the funds can be misused for money laundering and terror financing.
In November 2020, the Central Bank urged non-registered Hawala providers which operate in the UAE to officially register and obtain a certificate before December 2, 2020. People in the UAE can remit funds through exchange houses, banks and registered hawala operators.
The UAE continues to launch public awareness campaigns about hawala as violators could face hefty penalties for not adhering to the local laws.