Industry Downplays Impact of Remittance Scheme Cuts
Pakistan's decision to discontinue two government-backed remittance incentive schemes under reforms backed by the International Monetary Fund (IMF) is unlikely to significantly dent inflows from overseas workers, industry stakeholders said on Thursday, citing record remittances and a growing number of Pakistanis leaving for jobs abroad.
The State Bank of Pakistan (SBP) this week discontinued the Telegraphic Transfer Charges Incentive Scheme (TTCIS) and the Sohni Dharti Remittance Program (SDRP), two initiatives introduced to encourage overseas Pakistanis to send money home through formal banking channels. The TTCIS reimbursed banks and exchange companies for telegraphic transfer charges to keep remittances free for senders and beneficiaries, while the SDRP rewarded remitters with redeemable points through an official mobile application.
Record Remittances Underscore Resilience
Workers' remittances have become one of the most important pillars of Pakistan's economy, providing a vital source of foreign exchange that helps finance the country's import bill, support the rupee and ease pressure on the external account. Overseas Pakistanis sent a record $38.1 billion through official channels during the July-May period of fiscal year 2025-26, while May alone recorded an all-time monthly high of $4.3 billion.
“The IMF has been saying for two or three years that we are doing the wrong thing,” Exchange Companies Association of Pakistan (ECAP) Secretary General Zafar Sultan Paracha told Arab News, referring to the lender's concerns about the two schemes. IMF Resident Representative Mahir Binici and Pakistan Finance Adviser Khurram Schehzad did not respond to requests for comment.
Fiscal Savings and Revenue Leakage
Paracha said the telegraphic transfer scheme primarily benefited banks and intermediaries rather than overseas Pakistanis sending money home. He estimated the government's decision would save about Rs257 billion ($924 million), including roughly Rs250 billion ($899 million) from ending the TTCIS and less than Rs7 billion ($25 million) from discontinuing the SDRP.
“It was a revenue leakage and burden on the national exchequer,” he said, referring primarily to the TTCIS. However, he said the SDRP should have been improved rather than abolished because of its relatively small fiscal cost.
SBP Circulars Detail Phase-Out
Earlier, the SBP said in separate circulars issued to commercial banks and exchange companies on Wednesday that the TTCIS had been discontinued with effect from July 1. It also announced that no further reward points would be awarded under the SDRP from the current fiscal year that began on July 1, though reward points accumulated until June 30 would remain redeemable until the end of fiscal year 2026-27.
“SDRP shall become completely non-functional effective from July 01, 2027,” the SBP said. Pakistan is targeting $42 billion in workers' remittances during the current fiscal year.
Market Forces Expected to Sustain Inflows
Asked whether the withdrawal of the two schemes would affect remittance inflows, Paracha said any impact would be insignificant. “With the number of Pakistanis going abroad ... your remittance will increase,” he said. SBP Chief Spokesperson Noor Ahmed was also unavailable for comment.
However, a senior central bank official, speaking on condition of anonymity because they were not authorized to speak publicly, said the decision would not discourage remittances through official channels. “The market will do it [on its own],” the official told Arab News. “That is why the remittances have increased.” He said workers' remittances had become “a fully developed segment.” “We will be on target next year as well,” he added.
