Govt Introduces More Incentives for Remittances to Pakistan

The Federal Minister for Finance & Revenue Senator Muhammad Aurangzeb chaired a meeting of the Economic Coordination Committee (ECC) of the Cabinet at the Finance Division today.

A summary of the Finance Division regarding “Proposal for Revision in Home Remittances Incentive Schemes” was considered. After detailed discussion and deliberation, as per the proposal of SBP, the ECC approved the following revisions to the two Remittances Incentive Schemes as under:

• 1. Reimbursement of Telegraphic Transfer (TT) Charges Scheme:
• The flat reimbursement rate of SAR 30 per eligible transaction will be divided into Fixed (SAR 20) and Variable (SAR 08-15) components.
• The variable component will be linked to the incremental growth in remittances.
• Banks will receive higher rewards based on their performance in increasing remittance inflows.

Sources told ProPakistani that the flat reimbursement rate (SAR 30) per eligible transaction may be bifurcated into Fixed and Variable Components, with the latter 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 the Variable Component, additional reimbursement of SAR 08, per incremental eligible transaction, will be made for up to 10% or USD 100 million growth in remittances over the previous year (whichever is lower). Further, additional reimbursement of SAR 07, per incremental eligible transaction, will be made for growth exceeding 10% or USD 100 million.

Thus, higher performing banks viz-a-viz remittances inflows would progressively receive larger rewards i.e. up to SAR 28 or SAR 35 per eligible transaction (as the case may be), on its incremental volumes over the previous year.

This performance would be evaluated by SBP every month and payments would be reimbursed accordingly. Any required adjustment in payments, on a consolidated basis, would be made in the last quarter of FY.

State Bank of Pakistan was of the view that the revision presents substantial motivation for the banks to maximize their efforts to increase remittance inflows and may also lower the cost of TT Charges for the Government on an aggregate basis.

• 2. Incentive Scheme for Exchange Companies (ECS):
• The base rate for the fixed component will be increased from Rs. 1 to Rs. 2 per USD surrendered in the interbank market to SBP-designated bank(s).
• The variable component will be linked to the incremental growth in remittances.
• ECSs will receive higher rewards based on their performance in mobilizing remittances.

For the Variable Component, Rs. 3 may be paid per USD against incremental remittances up to 5% or USD 25 million (whichever is lower). Further, Rs. 4 per USD may be paid against incremental remittances above 5% or over USD 25 million, sources told ProPakistani.

The payment of the incentive may be made subject to the surrender of FX by ECs in SBP’s designated bank(s), as per the percentage prescribed by SBP. Their performance would be evaluated by SBP every month and payments would be reimbursed accordingly. Any required adjustment in payments, on a consolidated basis, would be made in the last quarter of FY.

According to SBP, this revision seems promising in motivating the ECs to mobilize higher home remittances for the country and would cover a portion of their operating cost that has increased due to PKR depreciation in the last couple of years.

These revisions are expected to further incentivize banks and exchange companies to increase remittance inflows, thereby boosting the country’s foreign exchange reserves.

The ECC also considered a summary of the Ministry of Communications regarding the “Execution of Frame-work Agreement between China and Pakistan on Realignment of KKH (Thakot-Raikot) under CPEC”. After detailed discussions and deliberations, and to comply with the codal requirements, the ECC allowed the Ministry of Communications/National Highway Authority to proceed with provisions of the Framework Agreement in accordance with provisions of rule-5 of Public Procurement Rules, 2004 for procurement of construction of realignment of KKH (Thakot Raikot Section 241 KM) project under CPEC (Phase-II).

The ECC considered another Summary of the Ministry of Communications regarding “Chakdara-Timergara, 39 Km Road Project (N-45)”. It was discussed that Rule-5 of Public Procurement Rules-2004 PPRA can be invoked after the authorization of ECC and consultations with relevant stakeholders.

Foregoing in view, the ECC authorized the Ministry of Communications/National Highway Authority to proceed in accordance with Public Procurement Rule-5 in Procurement of Consultancy Services required for Section-1 (Chakdara-Timergara, 39km) under Chakdara-Chitral Road Project (N-45).

The meeting was attended by Minister for Privatization Mr. Abdul Aleem Khan, Minister for Petroleum Mr. Mussadiq Masood Malik, Minister for Power Sardar Awais Khan Leghari, Minister of State for Finance & Revenue Mr. Ali Parvez Malik, Governor SBP, Chairman SECP, Federal Secretaries, and other senior officers of the relevant ministries.