The Ministry of Finance has said that the government’s measures announced recently to boost remittances have paid off as they have already reached $17 billion during the first nine months of the current fiscal year (Jul-Mar, FY2020) compared to $16 billion last year, registering a growth of 6.2%.
This trend shows that apprehensions and estimates as reported recently in the media about the estimates of the World Bank that there will be no inflows of remittances from March onwards, are highly unrealistic and on the basis of the current trend in remittances and the estimated COVID-19 impact, the remittance inflows are expected to reach $20-$21 billion in FY2020.
The Finance Division has noted that in order to encourage and facilitate the overseas Pakistanis to send their remittances through official banking channels, various initiatives have already been taken by the government which includes the following:
- The prevailing rate of TT charges has been enhanced from SAR 10/- to SAR 20/- for transactions between USD 100-200. It would cost an additional amount of Rs. 3 billion to the Government.
- The existing incentive scheme for the marketing of home remittances i.e PKR 01 against USD 01 of remittance amount beyond 15% growth over last year may now be based on tiered growth i.e Rs. 0.50 on 5% growth, Rs. 0.75 on 10% growth and Rs. 01 on 15% growth. It would cost an additional Rs. 600 million to the Government.
- To leverage home remittance customers and encourage them to use banking channels, withholding tax will be exempted from Jul 01, 2020, on cash withdrawal or on the issuance of banking instruments/transfers from a domestic bank account to the extent of remittances amount received from abroad in that account in a year. FBR has been requested for amendment in Income Tax ordinance through finance bill.
- A ‘National Remittance Loyalty Program’ will be launched from September 01, 2020, with the collaboration of major commercial banks and government agencies through which various incentives will be given to remitters through mobile apps and cards.
- Technical Supplementary Grant of Rs. 9.65 billion to reduce the lag time from 12 to 6 months in reimbursement of T.T charges to banks on home remittances.
Besides the above measures, the present government has improved its diplomatic relations with the Gulf States that helped restore the confidence of foreign employers in the Pakistani workforce. Resultantly, the export of manpower has been increased to Rs.491.854 during Jul-Feb, 2020.
The Finance Division has also pointed out that while the media reports quote the World Bank as projecting 23% decline in remittances, totaling about $17 billion in 2020, “compared with $22.5 billion in 2019, due to the economic crisis induced by the Covid-19 pandemic and shutdown as well as decline in oil prices”.
However, in reality, the remittances inflows during FY2019 stood at $ 21.7 billion instead of $22.5 billion.