SBP raises incentives to encourage home remittances, offers up to Rs4 per USD

The State Bank of Pakistan (SBP) issued a circular with revised incentive structures for the boosting of home remittances, building on previous structures put in place since February 2022. 

The changes to the original incentive structure are directed at exchange companies handling and surrendering these transactions to SBP-designated banks. The SBP has announced that the revised incentive structure will be retroactively effective from October 1, 2024. 

Home remittances are a form of inward remittances, with a direct impact on the families and friends of expatriates, and have been an essential source of external financing for the country.

Previously, there was a fixed rate of PKR 1 for each incoming USD. This fixed rate has now been increased to a base rate of PKR 2 for each USD, with further additions to the incentives in the form of a variable structure.

The variable structure introduces new incentives for incremental growth of home remittances, as it sets out an incremental rate of PKR 3 for each USD coming into SBP-designated banks. 

This will be applied for each additional dollar that exceeds the total amount of remittances collected in the previous year, up to a growth limit of 5% or USD 25 million, whichever is lower.

The SBP has also set out a structure for much higher growth, offering a higher rate of PKR 4 for each USD that exceeds the initial growth target of 5% or USD 25 million. This tiered approach incentivizes not just meeting but exceeding past performance metrics.

These incentives are aimed at encouraging exchange companies to actively boost the volume of remittances they process and surrender, fostering an increase in the overall remittance inflows in the country.

With these enhanced incentives, the SBP aims to sustain the growth momentum in remittances, which are vital for the country’s economic stability, and have grown by USD 3 billion since FY23.