On July 9, 2025, the State Bank of Pakistan (SBP) announced a reduction in incentives paid to banks and exchange companies for facilitating overseas remittances, despite a record $38.3 billion in inflows for FY25. The decision, shared during a Senate Standing Committee on Finance meeting in Islamabad, adjusts the reward structure to a flat 20 Saudi riyals per transaction over $100, down from a tiered system that offered up to 35 riyals for high-performing institutions.
The move follows concerns raised by Senator Saleem Mandviwalla, who highlighted that the cost of incentives had surged from Rs15 billion in 2009-10 to Rs130 billion, while remittances doubled from $18 billion to $38.3 billion over the same period. The committee urged redirecting benefits toward remitters to encourage formal channels over informal systems like hawala. Posts on X echoed concerns that reduced incentives might push remittances back to unregulated channels, potentially impacting inflows.
The SBP also emphasized promoting PayPak, Pakistan’s domestic payment network, to reduce reliance on foreign debit cards and curb foreign exchange outflows. Despite the cut, the central bank noted that robust remittance inflows, with Saudi Arabia ($9.34 billion) and the UAE ($7.82 billion) as top sources, have strengthened reserves to $14.51 billion and supported a current account surplus in FY25. The SBP plans to present a cost-benefit analysis to balance formal channel incentives with economic stability.
Published in SouthAsianDesk, July 10th, 2025
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