KARACHI: To encourage exchange companies to send more money home, the State Bank of Pakistan (SBP) on Tuesday announced a three-fold increase in financial incentives.
In FY24, remittances rose to $30.25 billion. The banking system handled the majority of the inflows, but the exchange companies also made a sizable contribution—they deposited about $5 billion.
“We have been in talks with the government for years to offer more incentives to support the increase in domestic remittances,” stated Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan. Ultimately, he continued, the administration made the commendable decision to boost the financial incentives last month.
The current incentive structure has been amended to further incentivize exchange firms (ECs) to enhance their home remittance mobilization efforts, according to the SBP circular released on Tuesday.
Exchange companies will receive up to Rs4 for every additional dollar
The State Bank upped the incentives to Rs4 per US dollar for exchange companies on home remittances beginning Oct 1. The circular states that the ECs will be given on a fixed component basis, with a base rate of Rs. 2 for every US dollar in domestic remittances turned in to banks authorized by SBP.
For every additional US dollar that ECs surrender, they will get payment of Rs3. This variable component is intended to stimulate growth in domestic remittances up to a maximum of 5% or $25 million, whichever is less than the preceding year.
Furthermore, against additional remittances exceeding 5 percent or over $25 million, relative to the previous year, Rs 4 per US dollar will be paid.
According to Mr. Paracha, the exchange companies were previously only receiving Re1 for every dollar, which was insufficient when compared to the incentives provided to the banks.
“This incentive will surely increase the remittances. We could increase remittances by roughly $6 billion, as there is still a fourth of the current FY25 open to boost inflows, according to Mr. Paracah.
