Latest news with #PakistanRemittanceInitiative
Business Recorder
10-07-2025
- Business
- Business Recorder
Remittance boom fuelling recovery
In fiscal year 2024–25, Pakistan witnessed a historic surge in remittance inflows, which climbed to an all-time high of $38.3 billion, marking a 26–27 percent increase compared to the $30.3 billion received in FY24. This robust growth not only exceeded earlier projections but also provided a critical buffer for the country's balance of payments. On average, monthly remittances reached $3.19 billion, significantly up from $2.52 billion the previous year. These inflows played a vital role in stabilizing Pakistan's external account, contributing to a current account surplus for the first time in over a decade. Moreover, they helped ease inflationary pressures and supported a relatively stable exchange rate. June 2025 capped the fiscal year with inflows totalling $3.406 billion, a year-on-year rise of nearly 8 percent from June 2024. However, this figure represented a month-on-month decline of around 7.5–8 percent from the peak in May 2025. Country-level data shows that Saudi Arabia contributed $823 million, the UAE $717 million, and the UK $538 million in June. Notably, remittances from the United States declined 13 percent year-on-year, while inflows from the European Union rose sharply by 34 percent. While Gulf countries continued to dominate the remittance landscape, the notable rise from EU countries helped diversify the sources. This shift reflects changing diaspora patterns and potentially more effective formal channelling of funds from Europe. The drop from the US may be attributed to softer economic conditions or seasonal variations. Several structural factors underpinned this record-breaking year. The government's Pakistan Remittance Initiative (PRI), coupled with the increased adoption of digital transfer systems like Raast, played a vital role in formalizing flows and reducing reliance on informal channels. A relatively stable rupee, an improved macroeconomic environment, and a continued boom in Gulf labour markets all contributed to the uptick. Additionally, remittance incentives and relaxed regulatory frameworks encouraged overseas Pakistanis to prefer formal routes. With increased demand for Pakistani labour in the Middle East and broader economic recovery, remittance flows remained resilient throughout the year. In regional comparison, countries like Bangladesh, India, and the Philippines have adopted targeted strategies to attract and sustain remittance inflows. Bangladesh, for example, provides a cash incentive on remittances sent through formal banking channels, which has significantly shifted flows away from informal hundi/hawala systems. India leverages its vast, diversified diaspora with proactive consular engagement, digital transfer systems like Unified Payment Interface (UPI), and tax benefits for non resident Indians. The Philippines, through its Overseas Workers Welfare Administration (OWWA), offers structured reintegration programs and savings schemes that encourage Filipino workers abroad to invest back home. These countries also maintain stronger coordination between central banks, labour ministries, and overseas missions to ensure timely resolution of issues faced by their diaspora. Pakistan, while making progress with initiatives like Raast and PRI, still lags in diaspora engagement strategies. Expanding financial literacy among migrant workers, strengthening bilateral labour agreements, and offering more investment-linked remittance products could help address this. For FY26, the target for remittances has been set at $39.4 billion, underscoring the government's expectation to sustain this momentum. However, some risks include including potential slowdowns in Gulf economies, geopolitical shifts, and domestic policy inconsistency. Maintaining remittance growth will require continued facilitation through policy incentives, improved digital infrastructure, and stronger diaspora engagement. More importantly, the challenge lies in channelling these inflows toward long-term investment and development goals rather than mere consumption, thereby transforming remittances from a financial buffer into a catalyst for inclusive economic transformation.
Express Tribune
10-07-2025
- Business
- Express Tribune
Incentive cuts may hit remittances
Listen to article State Bank of Pakistan (SBP) Acting Deputy Governor Dr Inayat Hussain cautioned on Wednesday that the government's decision to curtail subsidies for promoting foreign remittances, which hit a record $38 billion, may reduce the flow through banking channels. The statement came amid a disagreement between the federal government and the central bank on shouldering subsidies in the new fiscal year 2025-26 under the Pakistan Remittance Initiative (PRI). The finance ministry has not allocated any sum for the scheme while the central bank has also shown its inability to provide funds. The steps that the government has taken will push remittances back to the informal sector, said Inayat Hussain while speaking during a meeting of the Senate Standing Committee on Finance. Headed by Senator Saleem Mandviwalla, the committee had called the SBP to explain the reasons behind the faster increase in subsidies compared to remittances. In the past few years, the subsidies increased five times compared to a rise of only two times in remittances, said Mandviwalla. The central bank reported on Wednesday that workers' remittances rose 26.6% to $38.3 billion in the just ended fiscal year. Pakistan became the fifth largest recipient of foreign remittances in the world. The Pakistan Peoples Party government launched the PRI in 2009 when the amount remitted by overseas Pakistanis was just $7.8 billion. Remittances are now the single largest source of foreign earnings, which are even $6 billion higher than exports. However, last month the government substantially reduced the remittance incentives and allocated nothing in the budget for this fiscal year compared to Rs85 billion for the last fiscal year. Against the Rs85 billion allocation, the central bank billed Rs200 billion to the Ministry of Finance. Of the total cost, around 85%, or Rs170 billion, was under the Telegraphic Transfer (TT) Charges Scheme. Additional Finance Secretary Amjad Mehmood told the standing committee that the federal cabinet had approved a revision of the scheme following a summary moved by the finance ministry. The development came amid increasing pressure on the rupee, which further depreciated to Rs284.5 in the inter-bank market. In the open market, the rate was around Rs288 per dollar while in the grey market, the rate crossed Rs290, according to market players. The central bank issued a circular last week about revisions in the remittance scheme, which shows a substantial reduction in benefits for banks and exchange companies. Inayat Hussain told the committee that the government raised the minimum eligible transaction size to $200 and introduced a flat rebate of 20 Saudi riyal (SAR) per eligible transaction, effective from July 1, 2025. The old rate was from SAR20 to SAR35, which the government has cut by 43%. The TT Charges Scheme offers a zero-cost and free transfer model to the sender and receiver for eligible remittance transactions. The old model offered SAR20 reimbursement incentive for every transaction worth $100 and above, an additional per-transaction incentive of up to 10% on growth over the previous year and a further per-transaction incentive of SAR7 for growth exceeding 10% over the previous year. The federal government also decided that a mechanism should be established for gradually phasing out the Remittance Incentive Schemes. In that regard, the SBP would propose and present an evidence-based plan by factoring in the cost-benefit analysis of the existing schemes, Raast integration with Buna and SAMA gateways, and strengthening controls vis-a-vis the transfer of remittances through formal channels. The central bank deputy governor expressed concerns over these changes and any future plan to discontinue the scheme. "The scheme is very critical in bringing remittances from the informal sector to the formal sector," he emphasised. The government has also abolished the Exchange Companies Incentive Scheme (ECIS) under which these companies were getting up to Rs4 per dollar subsidy from the government. People were attributing the increase in remittances to the Financial Action Task Force (FATF)-related measures by foreign governments but the fact is that remittances were so small that these do not fall under the FATF purview, said Hussain. The deputy governor said that it was wrong to say that only banks were benefiting from the scheme as foreign remitters were also the beneficiaries. Despite reducing the benefits from July 1, the Ministry of Finance has not allocated any money for the remittance scheme.
Express Tribune
10-07-2025
- Business
- Express Tribune
Remittances hit record $38.3b
Listen to article Pakistan's worker remittances dropped 8% month-on-month (MoM) to $3.41 billion in June 2025, marking the end of a robust fiscal year. Despite the monthly dip, remittances for FY25 surged 27% year-on-year (YoY), reaching an all-time high of $38.3 billion. It comes in the wake of political and economic turmoil, which has forced a significant number of people to pursue migration. During June 2025, remittances amounted to $3.4 billion, up 8% from $3.2 billion in June 2024. However, inflows were down 8% MoM compared to $3.7 billion in May 2025, reflecting a typical post-Eid moderation. The sharp rise reflects multiple contributing factors, noted Arif Habib Limited Deputy Head of Trading Ali Najib. "Firstly, improved global economic conditions in key host countries, particularly in the Gulf region, supported higher income levels for overseas Pakistanis," he said. Secondly, there was formalisation of remittance channels, aided by the State Bank of Pakistan's (SBP) incentives under the Pakistan Remittance Initiative (PRI), and reduced reliance on informal means such as Hundi/Hawala, he added. Moreover, the relative stability of the rupee and tighter regulation of foreign exchange markets made formal transfers more attractive. The increase also signals rising confidence in Pakistan's banking system and a shift towards documented financial flows. The surge has positively impacted the country's current account position, supported foreign exchange reserves and provided crucial support to households dependent on remittances, thereby playing a significant role in stabilising macroeconomic fundamentals. "For FY26, $39.3 billion (around 3% YoY growth) is anticipated," said Najib. The annual surge was driven by higher inflows from traditional corridors such as Saudi Arabia ($9.3 billion, up 26%), the UAE ($7.8 billion, up 41%) and the UK ($5.9 billion, up 31%), as well as significant growth from EU countries ($4.5 billion, up 29%). Despite a 13% YoY decline in remittances from the United States, strong growth from the Gulf and Europe more than offset the shortfall. The robust rise in remittances played a key role in strengthening Pakistan's external account during FY25, supported by policy efforts to encourage the use of formal channels and digital banking platforms such as Roshan Digital Accounts. Pakistan is now one of the top five countries receiving the most remittances. Bangladesh also saw record inflows of $30 billion, up 26%, said Topline Securities CEO Mohammed Sohail. "They are a big source of support for both economies, helping bridge external gaps and boosting household incomes." However, the latest data for June 2025 reveals several emerging challenges. One of the most notable concerns is the MoM decline of 7.6% as remittances dropped to $3.406 billion in June from $3.686 billion in May. This drop, occurring right after Eidul Azha, points to a pattern of volatility that continues to affect the stability of inflows. Although fiscal year 2025 ended with a record $38.3 billion, monthly dips signal that Pakistan's remittances remain highly seasonal and potentially vulnerable to external shocks. Country-wise data further highlights key risks. Remittances from the US declined 10.5% MoM and 12.7% YoY, indicating a significant downturn in inflows from a major contributor. Similarly, the United Kingdom and the UAE reported monthly declines of 8.6% and 4.9%, respectively. This is concerning given that these three countries, along with Saudi Arabia, account for nearly 70% of total remittances. Such concentration poses a serious risk – any geopolitical, economic or regulatory changes in these countries could disproportionately impact Pakistan's external financing position. Additionally, remittances from the Gulf Cooperation Council (GCC) countries, excluding Saudi Arabia and the UAE, saw a steep 16.1% MoM decline. While these countries posted overall growth for FY25, their dependence on oil revenues and increasingly localised labour policies could create future uncertainties for Pakistani workers. The decline in flows from developed countries like Japan (-30.4% YoY), Canada (-8.6% YoY) and Norway (-4.3% YoY) also points to stagnation in these corridors, possibly due to integration challenges, inflationary pressures or reduced remitter incomes. Moreover, inflows from "other countries", which include less traditional destinations, fell 9% MoM in June, suggesting under-diversified diaspora engagement. Another structural issue is the country's reliance on seasonal inflows, particularly during Ramazan and Eid months. For example, March to May 2025 saw a surge, peaking at $4.1 billion, but the subsequent drop in June reflects over-dependence on religious occasions to drive remittances. Experts suggest that to ensure stable inflows, Pakistan must diversify remittance sources, boost skilled labour exports and strengthen incentives for formal channels.
Express Tribune
30-06-2025
- Business
- Express Tribune
PBA refutes claims subsidies serve no purpose
The Pakistan Banks Association (PBA) has strongly rejected "misleading assertions" in recent press coverage, suggesting that government subsidies to banks under remittance incentive schemes serve no economic purpose. "Such narratives dangerously undermine public confidence at a time when Pakistan's financial stability depends on robust formal remittance flows," the association said in a statement. It recalled that when the Pakistan Remittance Initiative (PRI) was conceptualised in 2008, formal remittances stood at only $6.5 billion, while an estimated $20 billion flowed through undocumented Hawala/Hundi channels, exacerbating balance of payments pressures. The PRI, launched in 2009, was a homegrown solution to shift flows to formal banking channels, offering an initial incentive of SAR 20 per transaction, approximately 2.25% of the average $500 transaction, which was far more viable than foreign borrowings carrying interest rates above 3.5% plus long-term repayment obligations and exchange rate risks. In contrast, PRI incentives are one-time PKR payments with no repayment liability, making them a strategic win-win for Pakistan's economy, the PBA said. According to the association, banks do not profit from these incentives. In reality, they bear enormous costs to remain competitive, offering higher rebates and forex premiums to money transfer operators and remitters abroad. "These costs are only partially offset by government incentives, with the remainder absorbed by banks to maintain essential liquidity for import payments and economic stability." Allegations that banks manipulate remittance data, launder undeclared funds, or facilitate tax evasion are baseless, it stressed, adding that banks operate under strict SBP regulations, AML/CFT frameworks, and independent audits. "The classification of freelancer and IT exporter earnings as remittances is a policy classification issue needing regulatory clarity, not bank misconduct."
Business Recorder
30-06-2025
- Business
- Business Recorder
PBA refutes reports on remittance subsidies to banks
The Pakistan Banks Association (PBA) rejected on Monday what it called 'misleading assertions' in recent press coverage suggesting that government subsidies to banks under remittance incentive schemes serve no economic purpose. 'Such narratives dangerously undermine public confidence at a time when Pakistan's financial stability depends on robust formal remittance flows,' PBA statement read. It further said when the Pakistan Remittance Initiative (PRI) was conceptualised in 2008, formal remittances stood at only $6.5 billion, while an estimated $20 billion flowed through undocumented hawala/hundi channels, exacerbating balance of payments pressures. 'The PRI, launched in 2009, was a homegrown solution to shift flows to formal banking channels, offering an initial incentive of SAR 20 per transaction, approximately 2.25% of the average $500 transaction, which was far more viable than foreign borrowings carrying interest rates above 3.5% plus long-term repayment obligations and exchange rate risks. In contrast, PRI incentives are one-time PKR payments with no repayment liability, making them a strategic win-win for Pakistan's economy.' The PBA was of the view that banks do not profit from the incentives. 'In reality, they bear enormous costs to remain competitive, offering higher rebates and FX premiums to Money Transfer Operators (MTOs) and remitters abroad. These costs are only partially offset by government incentives, with the remainder absorbed by banks to maintain essential liquidity for import payments and economic stability.' For example, it added, banks often pay Rs3-5 per USD premium over interbank rates to attract flows that would otherwise revert to hawala, incurring direct losses in the national interest. 'Contrary to claims, banks invest heavily in compliance systems, international correspondent banking relationships, technology platforms, and customer outreach to process remittances securely and efficiently,' the PBA said. Approximately 90% of rebates before FY25 and over 100% under FY25 schemes were passed directly to international partners, leaving no direct profit for banks, according to the association. 'Furthermore, banks pay their partners upfront while government reimbursements are delayed by months, imposing significant working capital costs. 'Banks submit monthly data of PRI remittances to SBP, duly reviewed and certified by Internal Audits of the Banks. SBP also conducts review of this certified data before making payment of incentive under the scheme.' Allegations that banks manipulate remittance data, launder undeclared funds, or facilitate tax evasion 'are baseless', the PBA said. It further said banks operate under strict SBP regulations, AML/CFT frameworks, and independent audits. The classification of freelancer and IT exporter earnings as remittances is a policy classification issue needing regulatory clarity, not bank misconduct, the press release stated. 'It is telling that such narratives are often promoted by vested interests seeking to dismantle the formal banking remittance ecosystem to divert flows back into their networks. These banking-led initiatives have been instrumental in ensuring Pakistan's compliance with global AML/CFT standards, preventing potential blacklisting that would cripple the economy. 'Pakistan's banks continue to offer competitive FX rates despite incurring losses, solely to preserve formal flows. Without these incentives, remittances would revert to undocumented channels, undermining fiscal sustainability and increasing dependence on costly foreign borrowing.' According to the PBA, the suggestion that banks are subsidised 'ignores the economic reality that these incentives ensure secure, documented, and traceable remittance flows critical for Pakistan's economy'. 'Banks remain among the country's largest taxpayers and employers, paying over Rs850 billion in taxes annually, while financing every facet of national economic activity. 'Mischaracterising their role only weakens public trust at a time when economic unity and realism are paramount.' The PBA said while modalities could be improved over time, PRI remained a strategic success story. 'The PBA remains committed to working with policymakers to strengthen Pakistan's economy, maintain global compliance, and safeguard financial stability, but rejects in the strongest terms any narrative driven by vested interests that undermines the banking sector's contributions and national economic security. 'PRI is an essential driver striving for Pakistan's financial independence and diversion from reliance on international debt and forex assistance,' the press release read.
