The Senate Standing Committee on Finance expressed concerns on Wednesday over the rise in charges for overseas remittances, as it was informed that fees charged by Money Transfer Operators (MTOs) had increased from Re1 to Rs4.5 per transaction, leading to windfall profits for banks and MTOs, amounting to nearly Rs130 billion.
As per reports, the meeting, chaired by Senator Saleem Mandviwalla, focused on the implications of these charges on Pakistan’s remittance system. Senator Faisal Vawda described the fee hike as a “scam.”
State Bank of Pakistan (SBP) Executive Director Inayat Hussain explained that the government had initially incentivised remittances by paying banks and MTOs between 20 and 35 Saudi Riyals per transaction. However, this amount was recently reduced to 20 Riyals for transactions of at least $200.
Senator Mandviwalla raised concerns, suggesting that the increase in charges has benefited banks and MTOs without providing substantial benefits to overseas Pakistanis. He called for the restoration of the previous Re1 per transaction fee structure to avoid further financial burden on remitters.
Hussain defended the current fee structure, stating that Pakistan’s average per-transaction remittance cost is $8.2, which is lower than India’s $10.2 and Bangladesh’s $13.9. He attributed the increase in costs to the depreciation of the rupee and higher operator charges.
The committee was also informed that the government spent Rs124 billion last year to subsidize remittance fees, with this year’s outlay projected to be between Rs80 and Rs100 billion. Hussain further revealed that MTOs had been breaking down transfers to maximize fees, a practice that was flagged by Senator Vawda.
In addition to the remittance issues, the committee raised concerns about fees charged by Visa and MasterCard for Pakistani credit cards denominated in US dollars, which amount to an estimated $130 million annually. The SBP confirmed that 70% of credit cards in Pakistan are Visa and MasterCard, with the remaining 30% being PayPak.
The committee also addressed the government’s decision to review the PRI and its incentive package to ensure that overseas Pakistanis receive the full benefit of their remittances, without undue profit-taking by banks and MTOs. The Minister of State for Finance and Revenue assured the committee that the issue would be reviewed in collaboration with the SBP and relevant stakeholders.
