THE year-over-year upswing of 13.4pc in workers` remittances during December is indeed good news for a country scrambling for stability amidst a protracted balance of payments crisis. This had forced the state to contract the economy during the last financial year to stall a default as forex reserves drained quickly on burgeoning imports and drying capital inflows. But then the cash sent home by overseas Pakistanis historically increases during the winter holidays.

The question is: will this trend hold over the second half of the current fiscal year? The market expects remittances to post a growth in March-April due to the `seasonal` effect during Ramazan and around Eid. However, market players believe that these inflows could shrink further during FY24 from last year when the tally dropped by a hef ty $4bn from the peak of more than $31bn in FY22. Overall remittances during the first half of the present fiscal are already down by 6.8pc compared with the corresponding period last year and could plunge further.

While the crackdown against dollar smuggling to Afghanistan as well as illegal currency business by exchange companies has helped the government reduce volatility in the forex market, and stabilise and improve the exchange rate, it has failed to boost inflow of remittances. That underscores the limitations of such actions. Call it a grey market or a black market, there are signs of re-emergence of illegal dollar trade once again. It is because the real reasons behind this illegal trade haven`t been addressed.

On top of the list is the issue of under-invoicing by large retailers and commercial importers to save taxes. The discrepancies of over $5bn in imports from China alone underline the gravity of the situation. The unannounced import restrictions are believed to have pushed under-invoicing in the last year or more. The other major reason for shrinking remittances is the current economic uncertainty, which has been aggravated by ongoing political instability. The market players believe that Pakistan has potential of doubling inflow of remittances. But this potential cannot be realised through short-term administrative measures. If Pakistan is to boost remittances, it will have to address the real issues that incentivise overseas Pakistanis to use non-banking or grey channels to send cash home.