Government to reduce rates of Pakistan Remittances Initiative
The federal government has decided
to conduct a comprehensive review of the Pakistan Remittances Initiative (PRI),
a key program designed to channel remittances through formal avenues. The
decision follows a sharp rise in payout costs, which have increased fourfold
over the past decade, while remittance inflows have roughly doubled.
Additional Secretary Finance Amjad
Mehmood informed the Senate Standing Committee on Finance and Revenue that a
summary to review the PRI scheme was submitted to the Economic Coordination
Committee (ECC) of the Cabinet, which granted approval. The federal Cabinet has
since directed a full reassessment of the scheme.
Chaired by Senator Saleem
Mandviwalla, the committee was briefed by Dr. Inayat Hussain, Deputy Governor
of the State Bank of Pakistan (SBP), who provided insights into the evolution
of the PRI scheme, including changes in transaction thresholds, rates, and the
financial impact of incentives over the years.
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Costs Outpacing Remittance Growth
Mandviwalla emphasized the urgency
of reviewing the initiative, citing a disproportionate rise in payouts. While
remittances have grown from around $19 billion a decade ago to over $36
billion, the payout under PRI surged from Rs20 billion to approximately Rs130
billion in the same period.
Dr. Hussain stressed that PRI
remains essential to directing remittances through formal channels. He added that
the eligible transaction limit under the scheme has been increased from $100 to
$200 to further incentivize usage.
Since its launch in 2009, the PRI
has significantly expanded its network. The number of participating financial
institutions has grown from 25 in 2009 to more than 50 in 2024, including
conventional, Islamic, and microfinance banks, as well as exchange companies.
Electronic Money Institutions (EMIs) are also now permitted to receive home
remittances via bank partnerships.
The number of international
remittance partners has jumped from 45 in 2009 to over 400 by 2025. In FY2024
alone, 33 new global entities began remitting through Pakistani financial
institutions under the PRI framework.
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remittances
Remittance inflows have climbed from $7.8 billion in FY2009 to $30.3 billion in FY2024 — nearly a fourfold increase. Over the past 10 years, growth has totaled 65%, underscoring remittances’ critical role in stabilizing the economy.
Local Card Payments and PayPak Push
The committee also addressed
concerns over the limited adoption of Pakistan’s domestic payment scheme, PayPak,
despite its cost-efficiency and local currency settlement. Chairman Mandviwalla
criticized the dominance of Visa and MasterCard, which he said collectively
earn around $300 million annually from the Pakistani market.
He recommended that commercial banks
be required to offer PayPak as an option at the time of issuing debit cards.
According to the SBP, of the 53 million debit and credit cards issued in
Pakistan as of March 2025, only 10 million are PayPak, and 2.5 million are
co-badged with international schemes. The rest are Visa or MasterCard.
In a written statement, the SBP
acknowledged the persistent dominance of international payment schemes due to
factors such as brand trust, global acceptance, support for e-commerce, and
promotional incentives for customers. Nonetheless, it reiterated its commitment
to reducing reliance on these networks by promoting cost-effective, local
alternatives.
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Co-badging arrangements that integrate local and international functionality are currently in development to enhance usability, including for global and online transactions. SBP continues to oversee efforts to ensure fair competition and lower the cost of digital financial services.
Source: Business Recorder