The State Bank of Pakistan has raised serious concerns over the government’s decision to cut incentives tied to the Pakistan Remittance Initiative, warning that it could reverse years of progress in steering remittance flows through formal banking channels. Acting Deputy Governor Dr. Inayat Hussain, speaking before the Senate Standing Committee on Finance, cautioned that slashing these benefits could encourage overseas Pakistanis to once again turn to informal money transfer networks, undermining the country’s foreign exchange reserves.
Dr. Hussain shared these views during a recent meeting chaired by Senator Saleem Mandviwalla, where members questioned the sharp rise in subsidies under the PRI compared to the actual growth in remittance volumes. While subsidies tied to remittances have grown nearly fivefold over recent years, the country’s official inflows have only doubled.
Despite such concerns, the PRI has played a vital role in strengthening Pakistan’s foreign exchange position. In the last fiscal year, remittances surged by 26.6 percent, reaching a historic $38.3 billion. This performance elevated Pakistan to the rank of the fifth-largest recipient of global remittances, with these inflows now exceeding the country’s export earnings by about $6 billion.
However, the government has taken a sharp turn in its policy. In the latest budget, it allocated no funding for the PRI scheme, a dramatic shift from Rs85 billion set aside a year earlier. Data from the central bank shows that actual costs under the program last year reached Rs200 billion, with nearly 85 percent of that sum directed to the Telegraphic Transfer Charges Scheme, which covered fees to facilitate swift remittance transfers.
Alongside these funding cuts, the government has revised key features of the PRI. According to Additional Finance Secretary Amjad Mehmood, the minimum transaction size eligible for incentives has been increased to $200. The rebate has also been flattened to 20 Saudi Riyals per qualifying transaction, down by 43 percent from the earlier range of SAR20 to SAR35. These changes became effective from July 1, 2025.
Additionally, the TT Charges Scheme, which previously supported free or subsidized transfers linked to transaction growth, has been restructured to narrow the payments flow. In another significant policy shift, the Exchange Companies Incentive Scheme has been abolished. Under that program, exchange companies received Rs4 per dollar in subsidies to encourage documented transfers.
These moves come at a challenging time for Pakistan’s external sector, with the rupee continuing to slide, recently trading at Rs284.5 to the dollar in inter-bank markets. The decision not to allocate funds for PRI has sparked concern among policymakers and industry watchers alike, given the critical role of these incentives in sustaining inflows through the banking system.
Dr. Hussain highlighted that the PRI has been instrumental in pulling billions into official channels since its launch in 2009. Looking ahead, the central bank plans to propose a phased approach to scaling back the scheme, which would include thorough cost-benefit studies, plans to connect Pakistan’s Raast instant payment system with global gateways, and stronger compliance to secure formal remittance flows.
He stressed that without carefully managed support, Pakistan risks undoing the substantial gains made over more than a decade in channeling remittances through regulated avenues — a move that could significantly impact the country’s economic stability.