KARACHI: The State Bank of Pakistan (SBP) on Tuesday announced a three-time increase in monetary incentives for exchange companies to bring more remittances into the country.

The remittances increased to $30.25 billion in FY24. Most of the inflows were received through the banking channels, but the exchange companies’ participation was not insignificant as they deposited around $5bn.

“We have been negotiating with the government for years to provide more incentives for the growth of home remittances,” said Exchange Companies Association of Pakistan General Secretary Zafar Paracha. Finally, last month, the government decided to increase the monetary incentives, which is an appreciable move, he added.

The SBP circular issued on Tuesday said that the current incentive structure has been revised to further incentivise exchange companies (ECs) in enhancing their home remittance mobilisation efforts.

Exchange firms to get up to Rs4 for each incremental dollar

The State Bank increased the incentives to Rs4 per US dollar for exchange companies on home remittances effective Oct 1. According to the circular, the ECs will be provided on a fixed component with a base rate of Rs2 for each US dollar of home remittances surrendered to SBP-designated banks.

On the variable component, ECs will be paid Rs3 for each incremental US dollar surrendered to encourage growth in home remittances up to 5 per cent or $25 million (whichever is lower) than the previous year.

Further, Rs4 per US dollar will be paid against incremental remittances above 5pc or over $25m, compared to the previous year.

Mr Paracha said that the exchange companies were earlier getting Re1 per dollar which was too little compared to incentives being given to the banks.

“This incentive will surely increase the remittances. Since three-quarters of the current FY25 are still available to improve the inflows, I believe we could contribute about $6bn to the total remittances,” said Mr Paracah.

Published in Dawn, October 9th, 2024