Timely Efforts by Govt and Banks Eased COVID-19 Impact on Remittances


Secretary Finance Naveed Kamran Baloch stated that a timely action and coordinated efforts by the Government of Pakistan and the country’s banks helped restrict the adverse impacts of COVID-19 on the flow of remittances to Pakistan as remittances to Pakistan declined by 4.3% (year- on – year) during March-May 2020 compared with World Bank’s forecast of 23% for 2020.

“The decline in case of Bangladesh is 16.7% during March-May 2020 the only comparable regional data available,” he said while addressing a Webinar arranged by DFID-UKAid to mark the Call to Action and the International Day of Family Remittances Action.

Naveed Kamran Baloch informed the participants that the initial assessment in Pakistan suggested a sharp decline in remittances from April 2020 onwards due to COVID-19 pandemic. However, the government adopted timely measures to mitigate these adverse impacts by asking the banks to conduct aggressive awareness campaigns to inform the senders and receivers of remittances about available digital/online channels for sending and receiving remittances.


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The banks were also asked to conduct similar campaigns with their overseas correspondents and further advised to ensure the availability of cash in remittance rich areas to cater to the needs of recipients.

The Secretary explained that the government instructed the banks to rationalize’ compliance checks with respect to both recipient and sender to ensure swift delivery of remittances. The banks were also requested to promote remittances through different marketing activities and incentive schemes (through gifts and lucky draws etc), and enhance their limit for cash over the counter. The central bank’s team of experts on AML/CFT communicated the message and explained the true spirit of AML/CFT regime to banks.

The Secretary said that in response to the measures suggested by the government, the banks augmented their efforts through this period by enhancing their marketing efforts through a record number of TV commercials of individual banks and a joint TV commercial by 6 large banks aired on domestic TV Channels and their international transmissions during May/June 2020 with particular focus on awareness regarding digital channels for sending and receiving payments.

Naveed Kamran Baloch was of the opinion that active support of the Government of Pakistan to promote remittances proved a shock absorber during COVID-19. He said that the government also amended two of the schemes to accommodate small remitters through expanding the scope of the free send model and broadening the scope of the marketing incentive scheme.

It is notable that Bangladesh authorities also modified their 2% additional cash incentive scheme to encourage remittances through formal channels. The threshold of remittance transactions without documentary evidence has been increased from USD 1500 to USD 5000.

The Secretary noted that it is not surprising that COVID-19 has been reshaping all the businesses particularly financial services.

Our data suggests that banks with automated processing systems, mobile wallets and direct account credit facility with large global money transfer operators, registered strong positive growths in remittances as against declines in remittance by banks without these products and automated processes.

He informed the meeting that Pakistan has witnessed the direct or first-round impact of COVID-19 on the flow of remittances so far.

The indirect or second-round effects of COVID due to significant slowdown in economic activities and oil prices in low trajectory were yet to hit labor markets, particularly in GCC. He said it was the right time for the banks to promote digital channels and direct account credit remittance products among remittance customers. He also suggested that the remittance recipient countries should focus on preparing comprehensive plans for the reintegration of expected returning migrant workers in their mainstream economic activities.

It may be noted that Pakistani Diaspora can send remittances to Pakistan under the free send model and the Government of Pakistan reimburses the cost of remittances to financial institutions under Reimbursement of TT Charges Scheme.

The government of Pakistan pays the remittance transaction cost @ Saudi Riyal 20 to domestic banks for transactions above USD 200. However, this amount was SR 10 for transactions between USD 100 to USD 200. Some overseas correspondents were not catering to small remitters due to less incentive. Therefore, effective from April 15, 2020; the rebate amount for transactions between USD 100 to USD 200 has also been increased from Saudi Riyal 10/- to Saudi Riyal 20/- to support small remitters.

The existing Incentive scheme for Marketing of Home Remittances i.e., reimbursement of PKR 01 against USD 01 of remittance amount beyond 15% growth over last year has been broadened to motivate more financial institutions.

Now the scheme for 2020 transformed into a tier-based such that financial institutions would be reimbursed incentive as per the incremental amount of different growth rates i.e. Rs. 0.50 on remittances exceeding 5% growth, Rs. 0.75 on remittances exceeding 10% growth and Rs. 1.00 on remittances exceeding 15% growth.

The objective of this amendment was to encourage larger FIS as they could not achieve double-digit growth in remittances due to their existing high base. Banks are mandatorily required to spend a minimum of 20% revenue generated from remittance business on marketing/awareness campaigns.

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