Pakistani banks may remit around $800 million to money transfer operators abroad to facilitate remittance inflows following the discontinuation of the Pakistan Remittance Initiative subsidy, according to a claim made before the Senate Standing Committee on Finance and Revenue. The matter was raised by Senator Saleem Mandviwalla while chairing the committee’s meeting in Islamabad. However, Deputy Governor of the State Bank of Pakistan Dr. Inayat Hussain rejected the claim and told the committee that no such plan was currently under consideration.
The committee reviewed several matters during the meeting, including the Pakistan Remittance Initiative, currency security, protection of foreign investments and concerns surrounding fraudulent practices by different companies. Discussions also focused on the continued circulation of counterfeit currency and the State Bank of Pakistan’s plans to introduce a new series of banknotes.
According to the State Bank of Pakistan, the government is preparing to introduce new currency notes amid concerns over increasing counterfeit Rs1,000 and Rs5,000 notes. Dr. Inayat Hussain informed the committee that work on the new notes had already started and that a ministerial committee headed by the Finance Minister had been constituted to oversee the design process. The government committee has approved the design, while further steps are required before the new notes can enter circulation.
The Deputy Governor explained that the existing Rs5,000 banknote was introduced in 2005 and that advances in technology have made counterfeiting easier. A tender for designing the new banknotes was advertised under Public Procurement Regulatory Authority rules, with four bidders participating in the process. The contract was subsequently awarded to a consulting firm, which is currently incorporating the required changes. The final design will then require approval from the Federal Government.
The issue of the consultant’s appointment came under scrutiny during the meeting. Senator Saleem Mandviwalla questioned the process through which the State Bank of Pakistan selected a consultant for the currency design, particularly because the consultant would also be involved in the printing process. He asked the State Bank of Pakistan to provide complete details of the tender and bidding process.
Senator Agha Shahzaib Durrani also expressed concern over the time taken to complete the new currency project, noting that the State Bank of Pakistan had reportedly been working on the new notes for around two years. The committee chairman subsequently directed the central bank to submit full details of the bidding process.
The committee also expressed serious concern over reports that some bank ATMs had dispensed counterfeit Rs5,000 and Rs1,000 notes. Senator Mandviwalla raised the case of three Rs5,000 notes that had been submitted to the State Bank of Pakistan for verification almost two years ago, saying that a response was still awaited.
The State Bank of Pakistan informed the committee that approximately one year would be required before the new currency notes could be introduced into circulation. The production cost of a new Rs5,000 banknote was estimated at around Rs14, while the existing Rs10 note is expected to be phased out as part of the currency changes.
Senator Anusha Rahman Ahmad Khan called for the approval process for new currency designs to be streamlined. She said repeated referrals for minor amendments could cause unnecessary delays and suggested that artificial intelligence could be used to make the process more efficient.
The Pakistan Remittance Initiative was another major focus of the meeting. Dr. Inayat Hussain told the committee that the government had previously provided subsidies to banks to facilitate remittances sent by overseas Pakistanis. A total of Rs120 billion had been provided under the subsidy arrangement, but the support was curtailed during the previous year.
The Deputy Governor said prevailing fiscal constraints meant that the government could not continue providing the subsidy under the current budget. As a result, banks had decided to bear the associated costs from their own resources to continue facilitating remittance inflows.
However, Senator Mandviwalla told the committee that banks were allegedly planning to remit around $800 million to money transfer operators to support the bringing of remittances into Pakistan. The committee was informed that approximately $257 million had been paid during the previous year for bringing around $41.6 billion in remittances into the country.
The committee appreciated the banks’ decision to bear the associated costs and decided to invite selected banks to its next meeting. The banks will be asked to brief the committee on their performance and contribution to Pakistan’s remittance sector. The committee also discussed the stability of the dollar against the Pakistani rupee. Dr. Inayat Hussain said that improvements in economic conditions and enforcement measures had helped keep demand for the dollar low.
Separately, the committee reviewed the Foreign Exchange Circular of 1999 concerning the protection of investments and deposits belonging to foreign investors in Pakistan. The State Bank of Pakistan Deputy Governor said instructions had been communicated to relevant banks at the time to protect foreign investors’ funds. According to State Bank of Pakistan records, no such case remains pending with the central bank. The discussions placed remittance facilitation, currency security and banking sector responsibilities at the centre of the committee’s review, while the State Bank of Pakistan continues work on replacing existing banknotes and addressing concerns related to counterfeit currency.
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