Two remittance incentive schemes: ECC approves revisions
The Economic Coordination Committee (ECC) of the Cabinet has approved revisions to the two Remittances Incentive Schemes including Incentive Scheme for Exchange Companies (ECS), expecting to further incentivize banks and exchange companies to increase remittance inflows, thereby boosting the country’s foreign exchange reserves.
Federal Minister for Finance & Revenue Senator Muhammad Aurangzeb chaired a meeting of ECC of the Cabinet on Thursday. ECC considered a summary of Finance Division regarding “Proposal for Revision in Home Remittances Incentive Schemes”. As per the Finance Division proposal submitted to the ECC, in order to incentivize remittance inflows through formal channels, government of Pakistan, through the SBP and Pakistan Remittance Initiative (PRI), has been implementing various Home Remittances Incentive Schemes.
To make incentives more attractive for the remitters, their beneficiaries and the Financial Institutions involved in the process, revisions were made in the Schemes in the year 2023. Remittance inflows witnessed consistent growth during fiscal year 2024 registering a positive cumulative growth of around 10.7 per cent YoY, totalling to USD 30.3 billion as compared to inflow of USD 27.3 billion recorded in fiscal year 2023.
SBP has now proposed revisions in two Home Remittances Incentive Schemes. These Remittance Incentive Schemes were launched with the approval of ECC/ Cabinet; therefore, the changes in contours of the schemes, as proposed by the SBP, are being placed before the ECC for approval.
Gist of existing contours of these 2 Schemes and proposed revisions along with rationale are detailed as follows: Reimbursement of Telegraphic Transfer Charges Scheme: TT Charges Scheme, launched in 1985, aims at remittance transactions that have zero cost on the sender and the receiver/ beneficiary in Pakistan on transactions exceeding USD 100.
The Authorized Dealers receive a uniform amount of incentive for eligible transactions; which is shared between Pakistani Banks and overseas remitting Financial Institutions (FIs). Last year, the incentive rate was increased to SAR 30 from an earlier rate of SAR 20 with the approval of ECC.
According to SBP, the revision had positive impact on the Scheme’s performance and to optimize its effectiveness following revisions have further been proposed: The flat reimbursement rate (SAR 30) per eligible transaction may be bifurcated into Fixed and Variable Components, with the later linked to the incremental rise in home remittances.
For the Fixed Component, a reimbursement of SAR 20 will be made for all eligible transactions of USD 100 and above. For Variable Component, additional reimbursement of SAR 08, per incremental eligible transaction, will be made for upto 10 per cent or USD 100 million growth in remittances over previous year (whichever is lower).