The federal government has decided to allocate Rs30 billion from the contingency fund to resume subsidies under the Pakistan Remittances Initiative (PRI), following a lapse in the finance ministry’s budgetary provisions. The move, which was approved after Prime Minister Shehbaz Sharif’s intervention, addresses the abrupt discontinuation of subsidies earlier this year, The Express Tribune reported.
The allocation would cover the scheme’s funding in the short term, with the Economic Coordination Committee (ECC) expected to approve the Rs30 billion shortly. Once the initial Rs30 billion is exhausted, additional funds will be allocated during the course of the fiscal year.
In the previous fiscal year, the government had set aside Rs87 billion for the subsidies, but the central bank’s claims amounted to Rs200 billion, primarily under the Telegraphic Transfer (TT) Charges Scheme. This prompted the finance ministry to discontinue funding and shift the responsibility to the State Bank of Pakistan (SBP), which is tasked with maintaining foreign exchange reserves.
Last month, the SBP had expressed concerns about its inability to provide subsidies due to restrictions under the International Monetary Fund (IMF) program. This led to a dip in remittance flows, as noted by SBP Governor Jameel Ahmad, who attributed the decline to the removal of the subsidy.
Prime Minister Sharif, however, emphasised the importance of supporting overseas Pakistanis, who contribute significantly to the country’s development through remittances. The renewed subsidies are seen as vital for maintaining the flow of remittances, which reached a record $38.3 billion in FY2024-25.
Despite the increase in remittances, the finance ministry remains concerned about the high cost of subsidies, which it views as a burden on public finances. Additionally, there have been concerns regarding the way some financial institutions break down remittance transactions to maximize benefits, leading to a need for closer scrutiny.
According to the news report, the government has also made changes to the Remittance Incentive Scheme, doubling the minimum transaction size to $200 and cutting rebates significantly.
The central bank has been tasked with proposing a phased approach to wind down these schemes in the future, including evaluating cost-benefit analyses and improving formal remittance transfer systems. The Exchange Companies Incentive Scheme has also been abolished, further reducing subsidies in the sector.
