Islamabad:
The Federal Government has decided initially a supplementary subsidy of RS30 billion to resume foreign remittance subsidies, indicating a lack of adequate consultation among interested parties before the Ministry of Finance eliminated budget subsidies in June.
Government sources told Express PAkGazette that the Ministry of Finance has admitted to the demand for subsidies of the Central Bank under the Pakistan Remittance Initiative of the Budget. However, the ministry agreed only after Prime Minister Shehbaz Sharif ordered that funds urgently disburse funds for the scheme.
Officials of the Ministry of Finance said the scheme would now be completely financed, and in the first phase, around RS30 billion could be approved very soon by the Economic Coordination Committee (ECC) of the Cabinet.
The officials said that since there was no assignment in the budget, the money would be removed from the contingency fund, which the federal government has retained to comply with unforeseen expenses. Once the 30 billion are exhausted, more assignments will be made during the course of the fiscal year, they added.
In the last fiscal year, the Ministry of Finance had assigned RS87 billion for subsidies. But against the allocation of RS87 billion, the Central Bank had billed RS200 billion to the Ministry of Finance. Of the total cost, around 85%, or RS170 billion, was under the scheme of telegraphic transfer charges (TT).
Due to the growing cost of subsidies, the Ministry of Finance suspended budget allocations and, on the other hand, asked the Central Bank to finance the scheme, since maintaining currency reserves was the responsibility of the SBP.
Last month, the special secretary, the Finanza, Nheeta Mohsin, told the Permanent Committee of the Senate that “we are clear that there is no money in the new budget for the Pakistan remittance initiative and that the Central Bank will have to find the sources of financing.”
But the Central Bank also informed the government last month that, according to the International Monetary Fund (IMF) program, it cannot offer any subsidies.
“Pakistani abroad are our strength and valuable assets, and their remittances won with so much effort play a vital role in the development of Pakistan,” said Prime Minister Sharif last week while ordering the Ministry of Finance that resume subsidies.
The sources said that the governor of SBP Jameel Ahmad declared in one of the meetings that, due to the interruption of subsidies, the flow of remittances had fallen into two digits during the first half of July. However, officials of the Ministry of Finance said that the deceleration in the remittances could be seasonal and should not be attributed solely to the interruption of the scheme.
SBP data shows that remittances reached a historical maximum of $ 38.3 billion in fiscal year 2024–25, an increase of 27% of $ 30.25 billion in the previous year. But the Ministry of Finance saw it as a burden of RS200 billion subsidies.
The government has not been able to increase exports substantially, which barely touched $ 32 billion in the last fiscal year. The remittances helped relieve pressure on currency reserves. Any deceleration in remittances can further press the rupee, which in recent days has begun to be appreciated due to official market intervention.
The Ministry also had a real concern that financial institutions were breaking a remittance transaction in many to claim more financial benefits, and it was necessary to analyze payments.
The interim vice governor of the Central Bank, Dr. Inayat Hussain also warned last month that the government’s decision to reduce subsidies to promote foreign remittances can reduce the flow of these payments through bank channels.
The federal cabinet has already approved a substantial reduction in remittance incentives. After the reviewed scheme, the Central Bank issued changes that significantly reduced the benefits for banks and exchange companies.
The Government doubled the minimum transaction size eligible to $ 200 and introduced a flat reimbursement of Saudi Riyal 20 by eligible transaction, as of July 1, 2025. The previous rate varied from 20 SAR to 35 SAR, which has now been reduced by 43%.
The TT position scheme offers a free and zero -cost transfer model to the sender and receiver for eligible remittance transactions. The old model offered 20 SAR reimbursement for each transaction worth $ 100 and more, an additional incentive of up to 10% growing during the previous year and an additional incentive of SAR 7 for growth of more than 10% during the previous year.
The federal government also decided that a mechanism should be established to gradually eliminate remittance incentive schemes. In that sense, the SBP has been asked to propose and present a evidence-based plan in a cost-benefit analysis of the existing schemes, the RAST integration with the buna and SAMA link doors, and the controls strengthened in the transfer of remittances through formal channels.
The government has also abolished the incentive scheme of exchange companies (ECIS), under which these companies received up to RS4 per dollar as a government subsidy.
