Islamabad:
The federal government has decided to initially provide an additional grant of 30 billion rupees to resume subsidies to sending foreign funds, indicating a lack of appropriate consultation between stakeholders before the Ministry of Finance abandoned the budget subsidies in June.
Government sources have told L’Express PK Press Club that the Ministry of Finance had conceded at the request of central bank grants under the initiative of Pakistan funds from the budget. However, the ministry only agreed after Prime Minister Shehbaz Sharif has ordered the urgency to pay the program funds urgently.
Officials of the Ministry of Finance said that the program would now be fully funded and, in the first phase, around 30 billion rupees could be approved very soon by the Economic Coordination Committee (ECC) of the firm.
The officials said that as there was no allocation in the budget, the money would be withdrawn from the emergency fund, which the federal government has preserved to respond to unforeseen expenses. Once 30 billion rupees are exhausted, other allowances will be made during the exercise, they added.
During the last financial year, the Ministry of Finance had allocated 87 billion rupees for subsidies. But against the allowance of 87 billion rupees, the central bank billed 200 billion rupees at the Ministry of Finance. On the total cost, around 85%, or 170 billion rupees, was a telegraph transfer program (TT).
Due to the growing cost of subsidies, the Ministry of Finance interrupted budgetary allowances and rather asked the Central Bank to finance the regime, because the maintenance of exchange reserves was the responsibility of the SBP.
Last month, the Special Secretary Finance Nasheeta Mohsin told the Senate’s permanent committee that “we are very clear that there is no money in the new budget for the Pakistani funding initiative and that the Central Bank will have to find sources of funding”.
But the central bank also informed the government last month by virtue of the International Monetary Fund (IMF) program, it cannot offer any kind of subsidies.
“Pakistani abroad are our precious forces and assets, and their hard -won funds play an essential role in the development of Pakistan,” said Prime Minister Sharif last week while ordering the Ministry of Finance to resume subsidies.
Sources said that the Governor of SBP, Jameel Ahmad, said at one of the meetings, which, due to the cessation of grants, the flow of funds had dropped two figures during the first half of July. However, officials of the Ministry of Finance said that the slowdown in funding of funds could be seasonal and should not be allocated solely to stopping the program.
SBP data shows that funding of funds reached a historic summit of $ 38.3 billion during the financial year 2024-2025, an increase of 27% compared to $ 30.25 billion the previous year. But the Ministry of Finance considered it a 200 billion rupee subsidy.
The government has not been able to considerably increase exports, which barely affected $ 32 billion in the last financial year. Shipments of funds have contributed to relieving pressure on exchange reserves. Any slowdown in funding can put pressure on the rupe, which, in recent days, has started to assess due to the official intervention on the market.
The ministry also had real concerns that financial institutions divide a transaction of payment into several to claim more financial benefits, and payments had to be examined.
The interim vice-governor of the central bank, Dr. Inayat Hussain, also warned last month that the government’s decision to reduce subsidies to promote sending of foreign funds could reduce the flow of these payments through banking channels.
The federal cabinet has already approved a substantial reduction in fund incentives. Following the revised regime, the central bank issued changes that have considerably reduced the advantages for banks and exchange companies.
The government has doubled the minimum size of transactions eligible for $ 200 and introduced a flat reimbursement rate of Saudi Riyal 20 by eligible transaction, from July 1, 2025. The old rate varied from 20 SAR to 35 SAR, which has now been reduced by 43%.
The TT Fresh diet offers a zero and free transfer model to the sender and the receiver for eligible payment transactions. The old model offered a reimbursement of 20 SAR for each transaction worth $ 100 and more, an additional incentive of up to 10% on growth compared to the previous year, and an additional SAR 7 incentive for growth greater than 10% compared to the previous year.
The federal government has also decided that a mechanism should be established to gradually eliminate the incentive regimes of funding. In this regard, the SBP was invited to propose and present a plan based on evidence, taking into account in an analysis cost-dispatches of existing schemes, the integration of Raast with the Buna and Sama bridges, and the reinforced controls on the transfer of funds via formal channels.
The government has also abolished the exchange program for exchange companies (ECIS), under which these companies received up to Rs4 by dollar as a government subsidy.
