The situation persists despite endeavors from the federal government and the State Bank of Pakistan (SBP) that include a joint initiative called Pakistan Remittance Initiative (PRI), the lifting of years-long ban from the export of foreign currency by the money exchangers, opening of dedicated booths at banks to facilitate families of Pakistani remitters abroad etc.
PRI is a central bank-backed initiative that, the SBP claims, is a major attributive factor for the present record growth in the flow of remittances to Pakistan through formal channels, thereby, helping the cash-strapped country. The State Bank’s second quarterly report shows that, during the current financial year, overseas Pakistanis had remitted a record $7.0 billion, $1.2 billion more than last year’s $5.8 billion.
However, sources in the money market said that over five million Pakistanis working overseas were still remitting, on average, around $900 million every month through informal channels. “Around $800 to $900 million are still coming to the country through the so-called hundi and hawala channels on monthly basis,” they added. Sources stated this was in addition to an equivalent amount, being sent home by Pakistan compatriots through official platforms like banks and money transfer companies.
“This ($900 million) accounts for 100 percent compared with the foreign exchange coming through formal channels,” said sources. The money exchange companies claim to have a plausible remedy for this problem, provided the regulator instills motivation through certain incentives. The Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan confirmed that over $800 million were still coming to the country through “badla” or “hawala.”
He said that money exchangers could rid the country of the two menaces if banks-like incentives are granted. Bostan said that the State Bank’s recent move to allow export of foreign currencies had enabled the local money exchange firms surrender around $ 125 million more in the inter-bank market during last month. The ECAP chief said the money exchangers had surrendered $225 million in March against their $100 million monthly contribution in the pre-ban era.
In January this year, the State Bank in line with the money exchangers’ longstanding demand, had lifted ban from the export of euro, ponds sterling and UAE dirham from Pakistan. Exchangers, however, are bound to deposit dollars equivalent to the exported currency in their foreign currency accounts.
According to Bostan, Pakistanis working abroad were inclined to remit their money back home through international money transfer firms whose transfer fees and time was far less than that of banks. He claimed that the delivery time and charges of money transfer companies were far smaller than that of the banks, who take at least two to three days in transferring the remitted amount to receivers.
In this concern, the recent April 8 meeting between money exchangers and SBP Governor Shahid H Kardar has taken place. However, a breakthrough could not be reached. In a pre-meeting talk, Bostan had told Pakistan Today that the meeting was to discuss ways to increase the country’s foreign exchange reserves, presently standing at record $18.1 billion against $15.1 billion of last year, to an extent that it rids Pakistan from the backbreaking external Loans.
