KARACHI: The central bank announced a new category in its loyalty program for overseas workers who send money home, as it seeks to reverse a decline in remittances that has hurt the country's foreign exchange reserves.
The State Bank of Pakistan (SBP) said on Friday that it has added a 'Diamond' category to the Sohni Dharti Remittance Programme (SDRP), which offers reward points and benefits to remitters and their beneficiaries who use formal channels. The new category is in addition to the existing three categories of 'Green', 'Gold' and 'Platinum'.
The Diamond category holders will enjoy enhanced reward points and other benefits such as arms license of non-prohibited bore, preferential treatment at Pakistan embassies/airports and gratis passport, the SBP said in a statement. The scheme has been effective from September 22, 2023.
The SDRP is a point-based loyalty program that was launched in 2019 by the then Finance Minister Ishaq Dar as part of his budget speech for fiscal year 2020.
“SDRP is a point-based loyalty programme in which remitters accumulate reward points by sending remittances through formal channels (SBP regulated entities),” the SBP said in a statement.
The reward points can be redeemed for free products and services such as emigrant registration fee, duty payment of imported mobile sets and vehicles, school fee, passport renewal fee, international air tickets and extra luggage charges, life insurance/takaful premium payment, purchases at utility stores, bill payments and PayPak card usage.
“Additional reward points redemption avenues like 1BILL and PayPak card are also being offered in SDRP. The addition of these new avenues will provide benefits to remitters and their beneficiaries to pay bills and use PayPak Card at merchants and Pakistani e-commerce stores,” the central bank said.
The latest initiative follows the SBP's announcement of incentives for financial institutions to boost remittances, which had declined due to political and economic instability and a widening gap between official and unofficial exchange rates.
In the first two months of the current fiscal year, Pakistani nationals working abroad sent $4.12 billion home, a 22 percent decrease from the same period last year, according to the SBP data. In August, remittances amounted to $2.09 billion, a 24 percent drop from a year ago and a 3.1 percent increase from July.
Analysts say that the crackdown on individuals involved in hawala/hundi transactions and exchange companies participating in illegal activity will increase remittances in the coming months.
Hawala/hundi is an informal system of money transfer that operates outside the banking system and offers better exchange rates than the official ones.
Pakistan relies heavily on remittances to support its balance of payments and foreign exchange reserves, which stood at $13.186 billion as of September 15, 2023.
During an analyst briefing on September 14 after the announcement of the monetary policy, the central bank governor Jameel Ahmed said that in FY2024, Pakistan is scheduled to repay a total of $24.6 billion, which includes $3.4 billion in interest payments and slightly over $21 billion in principal repayments.
So far this fiscal year, an amount of $2.8 billion has been successfully returned, consisting of $2.2 billion in principal and the remaining $0.6 billion in interest. This leaves an outstanding balance of $19 billion yet to be settled.
Approximately $11 billion of this amount is anticipated to be rolled over, with $8 billion already confirmed for rollover and the remaining $3 billion in rollover commitments in the pipeline. Consequently, the net repayable amount stands at $8 billion.