ECC calls for review of home remittance incentive schemes as costs exceed Rs200 billion in FY25

The Economic Coordination Committee (ECC) has called for a review and rationalisation of home remittance incentive schemes to ease the financial burden on the government, as the associated cost of remittance incentives exceeded Rs200 billion in FY25, according to a news report. 

During a recent meeting, ECC members stressed the importance of conducting a thorough analysis of these incentive schemes before any final decision could be made regarding their discontinuation. 

The committee agreed that a well-structured transition plan should be developed if the decision is made to gradually phase out these incentives, acknowledging that such a change could influence recipient behavior.

The Finance Division updated the committee on the government’s five initiatives aimed at incentivising remittances, which are being implemented by the State Bank of Pakistan (SBP) and the Pakistan Remittance Initiative. 

One of the primary schemes, the Telegraphic Transfer (TT) Charges Scheme, offers a zero-cost transfer model for eligible remittance transactions. Under the current model, which was approved in August 2024, senders and recipients receive a reimbursement incentive based on the transaction amount, with additional incentives for significant growth.

The SBP expects remittances to reach a record $38 billion by the end of June 2025. However, the associated cost of remittance incentives exceeded Rs200 billion in FY25, with the TT Charges Scheme accounting for around 85% of the total. The government incurred a quarterly cost of Rs50 billion, prompting the SBP to propose changes to reduce the burden.

The ECC’s proposed changes include raising the minimum eligible transaction amount from $100 to $200 and introducing a flat rebate rate of SAR 20 per transaction. 

Additionally, the SBP suggested merging the Exchange Companies Incentive Scheme with the TT Charges Scheme and discontinuing the Marketing Incentive Scheme starting from FY26.

This could reduce the overall cost of remittance incentives to Rs88 billion in FY26, a significant reduction from the Rs206 billion cost in FY25. The SBP also emphasised that the proposed changes should be announced by July 1, 2025, to avoid market confusion regarding the continuation of current schemes.

The ECC considered the proposal and approved the recommendations, directing the Finance Division and SBP to conduct a comprehensive impact analysis and develop a detailed transition plan for phasing out the remittance incentive schemes. The Finance Division was tasked with outlining a mechanism for payments to banks, aggregators, and exchange companies in consultation with the SBP.