ISLAMABAD: After tough conditions from the International Monetary Fund (IMF) for a fresh bailout package, the government has decided to launch a major initiative to raise up to $3 billion in three to four months from overseas Pakistanis to strengthen foreign exchange reserves and stabilise the exchange rate.Minister of State for Finance Saleem Mandviwalla told Dawn on Thursday that the government would notify amendments to Pakistan Remittances Initiative (PIR) rules next week to allow A-Class foreign exchange companies, Islamic banks and microfinance banks to bring in remittances in foreign exchange through official system.
“Our target is to increase remittances from overseas Pakistanis to $20 billion in almost a year but in the short term $1.5-3 billion of additional funds could be brought into the official channel in three to four months,” he said.
“That is the only way of converting current account into surplus on permanent basis,” he said.
He said annual remittances from overseas Pakistanis through official channels currently stood at about $13 billion and almost an equal amount was being sent home by Pakistanis through unofficial channels.
“We can easily divert a pie out of this huge potential into official system in a short period,” he said.
He said the targets for increasing remittances through official channels had been set in consultations with all stakeholders, including banks and foreign exchange companies, adding the A-Class foreign exchange companies could also be granted banking licences in the next phase to better utilise their capacity and network.
In his view, the foreign exchange companies were remitting funds from overseas Pakistanis through hundi system because rules did not allow them to facilitate such transactions in official channels.
He said the international exchange companies were collecting funds from individuals abroad and sending them to Pakistan through banks by sharing an incentive of $25 provided by the government per $1000 transactions with the banks that did not benefit Pakistanis working overseas.
Once domestic exchange companies were allowed into official system, they were expected to share the incentive with the remitter instead of sharing it with banks.
After amendment in the PRI rules, Mr Mandviwala said he would lead a delegation of exchange companies abroad, including to the UK and the Middle East, for marketing and signing deals with international foreign exchange companies.
Responding to a question, he agreed that pressure on external account could enhance in coming days owing to political transition and hence it was important to tap Pakistan’s own resources abroad.
He said the IMF programme should always be treated as insurance in case of emergencies to avert default on international obligations and provide comfort level to bilateral and multilateral lenders for foreign inflows through implementation of agreed macroeconomic indicators with the IMF.
He said the government did not see any urgency for IMF programme and instead it would increase our own remittances to build foreign exchange reserves and strengthen rupee against dollar.
Asked as to why he expected the new initiative to succeed when the government had a limited time left, the minister said no matter who is in interim government or forms next democratic government, a good initiative would not only continue but would be further improved by the next government.