Senator ‘Exposes’ Remittance Subsidy Scandal Benefitting Banks

The Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwala, held a meeting today in which the committee received a briefing from the State Bank of Pakistan regarding the remittances subsidy scheme. He pointed out that previously, the government provided one rupee for every dollar sent as remittance, but now the subsidy has increased to Rs. 4.5 per dollar. The State Bank of Pakistan disclosed that the government is expected to spend Rs. 80 billion on the incentive scheme for remittances in the current fiscal year. The committee recommended that the central bank reverse the increased MTO charges and bring them back to the previous level of Rs. 1 per transaction. A representative from the State Bank of Pakistan clarified that the remittance relief is not paid in dollars but in Saudi Riyals. In an effort to reduce the cost of the incentive package, the government has now set a fee of 20 Saudi Riyals per transaction for remittances, applicable to transactions worth at least $200. According to the representative, 20 Saudi Riyals are given to banks for each remittance, with the recipient not having to pay any fees unless they are required to pay 16 or 17 Riyals. The SBP’s deputy governor informed the committee that the remittance subsidy scheme, launched in 2020, initially provided 20 Saudi riyals per transaction. In 2024, this subsidy was increased to 30 riyals but was reduced again to 20 riyals in the current year. He explained that the relief is given in Saudi riyals to banks, with 20 riyals provided per transaction, while the sender of remittances does not pay any fees unless charged 16 or 17 riyals in certain cases. Last fiscal year, payments ranged between 20 and 35 riyals, but the amount was cut back to 20 riyals this year. According to the SBP, the scheme contributed to an $8 billion increase in remittances. Senator Faisal Vawda strongly criticized the scheme, calling it a “scandal” and demanding an inquiry. He argued that banks had benefited enormously, with billions of rupees going into their accounts, and urged the FBR chairman to recover the amounts. Vawda added that remittance growth was due to larger sums being sent, not because of the subsidy. He insisted that the SBP governor present complete data for the past three years. “This scheme is benefiting banks more than citizens. An inquiry must be carried out,” Vawda remarked. State Minister for Finance Bilal Azhar Kayani noted that the scheme prevented remittance senders from paying extra charges, while the SBP representative said changes introduced this fiscal year would save 30 percent in costs.