SBP Boosts Incentives to Strengthen Remittance Inflows
The State Bank of Pakistan (SBP) has introduced significant changes to the incentive structure for exchange companies (ECs) in an effort to further encourage the mobilization of home remittances from overseas Pakistanis. Under the revised structure, exchange companies will receive a fixed base rate of Rs2 for every US dollar of home remittances surrendered to banks designated by the SBP, effective from October 1, 2024. This marks an increase from the previous rate of Rs1 per US dollar.
Additional Payments for Remittance Growth
To incentivize further growth, exchange companies will be paid Rs3 for every incremental US dollar surrendered for growth in remittances of up to 5% or $25 million, whichever is lower, compared to the previous year. For growth exceeding 5% or $25 million, an additional Rs4 per US dollar will be paid. These new measures aim to motivate exchange companies to process more remittances and help manage their increasing operational costs.
Government Initiatives to Promote Remittances
The government, via SBP, has introduced schemes like the Pakistan Remittance Initiative (PRI) to boost official remittances. These initiatives have played a crucial role in encouraging remittance inflows into the country. Following the revisions made to these schemes in 2023, remittance inflows have shown a steady increase.
Growth in Remittance Inflows
These efforts led to remittances rising to $30.3 billion in FY24, up from $27.3 billion the previous year. The revised incentives are expected to maintain this positive trend, keeping remittance inflows strong. This is crucial for financing imports and repaying foreign debt.
