Islamabad:
The federal government has decided to initially provide a supplementary grant of the RS30 billion.
Government sources told The Express Pakinomist that the Ministry of Finance has admitted the central bank’s demand for subsidies under the Pakistan transfer initiative from the budget. However, the ministry only agreed that Prime Minister Shehbaz Sharif ordered it to be urgent to pay funds to the scheme.
The Ministry of Finance’s officials said the scheme would now be fully funded, and in the first phase, approx. The RS30 billion is very soon approved by the Cabinet’s financial coordination (ECC).
The officials said that when there was no allocation in the budget, the money would be taken out of the Emergency Fund, which the federal government has preserved to meet unforeseen expenses. When the RS30 billion is exhausted, additional allocations are made during the financial year, they added.
In the last financial year, the Ministry of Finance had awarded RS87 billion to the subsidies. But against the RS87 billion award, the central bank had invoiced RS200 billion to the Ministry of Finance. Of the total costs, approx. 85%or RS170 billion under the telegraphic transfer (TT) chart.
Due to the growing costs of subsidies, the Ministry of Finance ceased budgetary allocations and instead asked the central bank to finance the scheme as the maintenance of currency reserves was SBP’s responsibility.
Last month, the Special Secretary Financing Nasheeta Mohsin Senate’s Standing Committee stated that “we are very clear that there is no money in the new budget for the Pakistan transfers initiative and the central bank will have to find the sources of financing.”
But the central bank also informed the government last month that it is unable to offer any kind of subsidies under the International Monetary Fund (IMF) program.
“Overseas Pakistanis are our strength and valuable assets, and their hard -earned transfers play an important role in Pakistan’s development,” Prime Minister Sharif said last week, ordering the Ministry of Finance to resume subsidies.
Sources said that SBP Governor Jameel Ahmad said in one of the meetings that due to cessation of subsidies, the flow of transfers had decreased in double digits during the first half of July. However, the Ministry of Finance’s officials said that the redemption in transfers could be seasonal and should not be attributed to the termination of the scheme exclusively.
SBP data shows that transfers reached a historic highlight of $ 38.3 billion in the 2024-25 financial year, an increase of 27% from $ 30.25 billion the year before. But the Ministry of Finance regarded it as a subsidy load of RS200 billion.
The government has not been able to significantly increase exports, which hardly affected $ 32 billion in the last financial year. Transfers helped ease the pressure on currency reserves. Any slowdown in transfers can further press the rupe, which in recent days has begun to appreciate due to official intervention in the market.
The ministry also had genuine concerns that financial institutions broke a transfer transaction to many to demand more financial benefits, and there was a need to investigate the payments.
Acting Deputy Governor of Central Bank DR Inayat Hussain also warned last month that the government’s decision to limit subsidies to promote foreign transfers could reduce the flow of these payments through banking channels.
The federal cabinet has already approved a significant reduction in transfer incentives. According to the revised scheme, the central bank issued changes that significantly reduced benefits for banks and exchange companies.
The government doubled the minimal eligible transaction size to $ 200 and introduced a flat discount rate on Saudi Riyal 20 per Eligible transaction with effect from July 1, 2025. The old rate ranged from 20 sar to 35 sar, which has now been reduced by 43%.
The TT charging scheme offers a zero-cost and free transfer model to the sender and the recipient of eligible transfer transactions. The old model offered 20 SAR refunds for each transaction worth $ 100 and above, an additional incentive of up to 10% on growth in the previous year and a further incentive of SAR 7 for growth of over 10% over the previous year.
The federal government also decided that a mechanism should be established to gradually phase out the transfer incentive schemes. In this regard, SBP has been asked to suggest and present an evidence-based plan factory in a cost advantage analysis of existing schemes, Raast integration with Buna and Sama Gateways and strengthened controls when transferring transfers through formal channels.
The government has also abolished the Exchange Companies Incentive Scheme (ECIS), where these companies received up to RS4 per year. Dollar as a state grant.
