The State Bank of Pakistan (SBP) has expressed concern over the government’s decision to reduce subsidies for the Pakistan Remittance Initiative (PRI), which has contributed to a record $38 billion in remittances for the fiscal year 2024-25. SBP Acting Deputy Governor Dr. Inayat Hussain cautioned that the removal of incentives could lead to a reversal of remittances from banking channels back to the informal sector.
Reducing incentives may hit remittances, shift inflows to informal channels, warns SBP
According to media reports, Dr. Hussain’s remarks came during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla. The committee called on SBP to explain why subsidies have increased significantly compared to remittances. Over the past few years, the subsidies grew fivefold, while remittances only doubled.
In the fiscal year just ended, Pakistan saw a 26.6% increase in remittances, reaching $38.3 billion, making it the fifth-largest recipient of foreign remittances globally. Since the launch of the PRI in 2009, remittances have become Pakistan’s single largest source of foreign exchange, surpassing exports by $6 billion.
However, the government has cut back on remittance incentives, allocating no funds for the scheme in the new fiscal year, compared to Rs85 billion in the previous year. The central bank reported that the actual cost of subsidies last year was Rs200 billion, with 85% of this amount spent on the Telegraphic Transfer (TT) Charges Scheme.
Additional Finance Secretary Amjad Mehmood informed the committee that the cabinet had approved a revision to the PRI scheme. The government increased the minimum eligible transaction size for remittances to $200 and introduced a flat rebate of 20 Saudi Riyals (SAR) per eligible transaction. The previous rebate ranged from SAR20 to SAR35 but was reduced by 43%. The new rules came into effect on July 1, 2025.
The TT Charges Scheme, which had offered free transfers for eligible remittance transactions, has also been revised. Under the previous scheme, remitters were provided with incentives based on transaction growth, but the new structure aims to streamline payments.
The government has also abolished the Exchange Companies Incentive Scheme (ECIS), which previously provided a Rs4 per dollar subsidy to exchange companies. These changes come as Pakistan’s remittance sector faces growing pressure, with the rupee continuing its depreciation, reaching Rs284.5 in the inter-bank market.
Despite these reductions, the Ministry of Finance has not allocated any funds for the PRI scheme, a decision that has drawn significant concern from SBP.Â
Dr. Hussain emphasised that the PRI scheme is critical in ensuring that remittances flow through formal channels, benefitting both the financial sector and foreign remitters.
The central bank is expected to propose a gradual phase-out plan for the scheme, factoring in the cost-benefit analysis of existing programs, the integration of Raast with international gateways, and strengthened controls to maintain formal remittance transfers.Â
Dr. Hussain warned that without the necessary incentives, Pakistan could lose the gains made in bringing remittances into the formal financial system.
