As of June 1, 2023, the Pakistani central bank has proposed new incentives for banks and approved exchange providers to promote more remittances from Pakistanis living abroad, which is expected to stabilize and offer a fresh push to inflows.
The State Bank of Pakistan (SBP) announced on Thursday in a circular sent to all authorised foreign exchange dealers (primarily commercial banks), microfinance banks (MFBs), and exchange companies that a performance-based incentive would be granted, by the end of current financial year, to those financial institutions whose efforts resulted in a growth in home remittances compared to the previous year (FY2022-23).
“The cash incentive would be Rs1 per US dollar for incremental home remittance of the FIs (financial institutions) up to 5%, Rs2 per US dollar for incremental remittance between 5% and 10%, and Rs3 per US dollar for incremental remittance over 10%.”
The scheme would be in operation permanently beginning in FY2023-24, according to the circular.
The central bank announced in a circular sent to all licenced FX dealers and MFBs that it had decided that, for qualified home remittance transactions, it would reimburse the TT (telegraphic transfer) charges at the rate of 30 Saudi riyals.
The circular stated that the new TT fees will go into effect 30 days after the date of issuance for domestic remittance transactions received in Pakistan.
It has recently come to light that TT fees currently stand at 20 Saudi riyals for deals worth $100 to $200 or their equivalent in other currencies.
However, after 30 days after the letter’s issuing date, the central bank announced that the incentive of airtime equal to Rs2 per US dollar will be discontinued.
M-Wallet Scheme was an incentive granted by the government to all banks and MFBs to encourage domestic money transfers as part of branchless banking laws.
Remittances dropped 22% in the first two months (Jul-Aug) of the current fiscal year, totaling $4.12 billion compared to $5.26 billion during the corresponding period in the previous fiscal year.
Most remittances to Pakistan come from the Middle East and the illicit currency market and Hawala-Hundi network in those regions have strengthened, leading to a reduction in inflows, according to financial analysts.
The army has been heavily supporting the caretaker government’s recent assault on cash traffickers and hoarders. The Pakistani rupee has risen by about 5 percent in the past 12 business days, reaching a five-week high of Rs292.78 per dollar on Thursday in the interbank market.
Foreign exchange reserves increased by $56 million, the central bank stated on Thursday, bringing the total to $7.69 billion. Earlier, the reserves had dropped every week for a total of seven weeks.
Naya Pakistan Certificates (NPCs), an investment vehicle created by the central bank, now offer a higher rate of return. These certificates of deposit are purchased using funds through a Roshan Digital Account (RDA).
Certificates are available in Pakistani Rupees, U.S. Dollars, British Pounds, and Euros, with returns of up to 6%.
On Wednesday, SBP Governor Jameel Ahmad announced that the central bank had invited 10 banks to form rupee-dollar exchange companies and facilitate individuals. This was because, unlike the exchange companies, the banks had abundant foreign currencies.
In addition, he stated that all Category ‘B’ exchange companies had been given 30 days to either upgrade to full-fledged status, merge with other companies to become full-fledged enterprises, or sell their operations before their licences were revoked.
