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The Impact of Pakistani Government Regulations on Remittance Inflows

31 May 2023

Remittances are essential to Pakistan's economy since they bring much-needed funds to increase its foreign exchange reserves. Pakistan is the 6th largest remittance recipient in the world, recording $31.2 billion in remittance in FY22. The Pakistani government has implemented several strategies to make it easier for remitters to transfer funds through legitimate channels since it recognises how important these money transfers are for migrant workers who send money to Pakistan to improve living standards for their loved ones.

Because they account for approximately half of Pakistan's import costs and the deficit in the trade of goods account, remittances are crucial in stabilising the country's external sector. The worldwide economic slump has put them under pressure, though. The State Bank of Pakistan has been implementing various strategies to improve home remittances in the current situation.

When it comes to the fiscal framework of Pakistan, remittances play a pivotal role. But have you ever wondered how government regulations influence these remittance inflows? This article delves into the intricacies of this dynamic relationship.

The Role of Remittances in the Pakistani Economy

The Remittance Landscape in Pakistan

In the hustle and bustle of daily life in Pakistan, millions of hardworking individuals send their earnings back home as remittances. With nearly 9 million Pakistanis living abroad, remittances are a significant source of foreign exchange and a lifeline for many households.

Economic Significance of Remittances

Just how critical are these remittances? As of 2023, remittances contribute significantly to Pakistan's GDP, offering financial stability and economic resilience, especially in the face of external shocks such as the COVID-19 pandemic.

Understanding Government Regulations

Key Regulations Governing Remittances

The Pakistani government, via the State Bank of Pakistan (SBP), implements several regulations to oversee remittances. But why does it matter? Well, these regulations help ensure the safe, efficient, and transparent transfer of funds. These regulations and strategies also help encourage overseas Pakistanis to abstain from using unregulated channels and turn towards legal, authorised, and regulated channels of remittances.

Role of State Bank of Pakistan

As the central bank, the SBP plays a critical role in regulating remittance inflows. From licensing Money Transfer Operators to overseeing Anti-Money Laundering measures, the SBP works diligently to safeguard remittances.

Pakistan Remittance Initiative- PRI

A cooperative project known as the Pakistan Remittance Initiative was started by the State Bank of Pakistan, the Ministry of Overseas Pakistanis, and the Ministry of Finance to establish an ownership framework for remittance facilitation in Pakistan (PRI). All required measures and procedures will be taken as part of this endeavour to improve the flow of remittances. ACE Money Transfer and Bank Al Habib have joined hands to promote the vision of PRI to facilitate regulated remittance inflows to Pakistan by incentivising the process. Both partners are offering massive cash rewards on every online money transfer to Pakistan through these two institutions until the 30th of June, 2023.


The objectives of PRI are as follows:

  • Facilitating, supporting, cheaper, quicker, more convenient, and more efficient remittance flow
  • To provide overseas Pakistanis with investment options in Pakistan:

Inter Bank Fund Transfer- IBFT

Beneficiaries can also access quick A/C credit through ATM Switch and Inter Bank Fund Transfer in addition to RTGS (IBFT). As long as the relevant beneficiary account number (IBAN) is included in the payment instructions, the turnaround time for account credit has now been significantly shortened to no more than 30 minutes.

Cash Over the Counter- COC

As cash over-the-counter (COC) payments of home remittances are a common way to collect remittances in Pakistan, PRI enabled banks to launch them. The COC payments for remittances have already begun at all major banks. This is an immediate service that PRI introduced, and it has a significant impact. 

Foreign Exchange Remittance Card - OVERSEAS PAKISTANIS FOUNDATION

Through regular banking channels, remittances from Pakistanis living abroad are a crucial source of funding for the nation's balance of payments. Through Hundi or other tactics, many people conduct money transfers to Pakistan, depriving the nation of much-needed assistance. Recognising the issue of declining home remittances, the government has launched a concentrated initiative to assist Pakistanis living abroad who send money through conventional banking channels.

The Ministry of Finance introduced a unique package of Foreign Exchange Remittance Cards (FERC) in September 2001 to help the community of Pakistanis living abroad. The authority for implementation has been designated as OPF.

Impact of Regulations on Remittance Inflows

Promoting Formal Channels for Remittances

One of the primary objectives of government regulations is to promote the use of formal channels for remittances. Through initiatives like the Pakistan Remittance Initiative (PRI), the government encourages migrant workers to use formal remittance channels, subsequently boosting remittance inflows.

The Influence on the Volume of Remittances

Government regulations also impact the volume of remittances. Stricter regulations can potentially deter remittances through formal channels, while lax regulations could invite illicit activities. Striking a balance is crucial for maximising remittance inflows. Since every money transfer to Pakistan from overseas accounts for a valuable addition to the country’s economy and financial support to several households, the government has been putting its best efforts into regulating remittance inflows through authorised channels by streamlining the entire process for overseas Pakistanis.

Case Studies: Regulation and Remittance Inflows

Positive Impacts: Regulation Success Stories

Take the example of the PRI. Since its launch, there's been a marked increase in remittances through formal channels. Similarly, the SBP's policies aimed at digital remittances have enabled safer and faster money transfers.


Challenges and Criticisms

However, not all is smooth sailing. Certain regulations have faced criticism, often seen as overly stringent or ineffective. For example, regulations targeting illicit money transfers have sometimes inadvertently complicated legal remittances, leading to an increase in informal transfers.

Future Projections: Remittance Inflows and Regulations

The Potential Impact of Emerging Technologies

As we peek into the future, emerging technologies like blockchain offer new avenues for remittances. How the Pakistani government regulates these technologies could significantly impact future remittance inflows. An open yet cautious approach might prove beneficial.

Ongoing and Future Regulatory Developments

The government continues to refine its regulatory framework to manage remittance inflows better. Proposed measures aim to streamline procedures, enhance transparency, and further encourage the use of formal channels.


The interplay between government regulations and remittance inflows in Pakistan is complex and multifaceted. While regulations aim to ensure safety and transparency, they must be carefully calibrated to facilitate remittances, which are a vital lifeline for many Pakistani families and a critical component of the national economy.

ACE Money Transfer values the work that its users put forth and strives to offer secure and affordable transfers to all of its customers. ACE makes it easier for its customers by enabling them to send money online to more than 100 different countries with merely a few taps on their mobile screens.

The Pakistani government is initiating many regulations accommodating online money transfers to Pakistan. Remittances are very important for Pakistan as remittances operate as a catalyst for investment and a lifeline for economic growth by starting a cycle of consumption, production, exports, income, and further investment as a significant share of GDP to support Pakistan's cash-strapped economy. Overseas Pakistanis are encouraged to send money to Pakistan online via ACE Money Transfer and Bank Al Habib to play their role in the good cause and also win cash rewards as tokens of appreciation for their contributions.



What are remittances?

Remittances are funds sent by migrants to their home country. In the context of Pakistan, they play a significant role in the economy.

What role does the Pakistani government play in regulating remittances?

The Pakistani government, primarily through the State Bank of Pakistan, implements regulations to ensure the safety, efficiency, and transparency of remittance transfers.

How do government regulations impact remittance inflows in Pakistan?

Government regulations can influence the volume and flow of remittances by promoting formal channels, impacting the choice of transfer methods, and potentially affecting the overall volume of remittances.

What future developments could affect remittance inflows and their regulation?

Emerging technologies, such as blockchain, could reshape the remittance landscape. The government's approach to these technologies will likely impact future remittance inflows.

What are some challenges and criticisms of current regulations?

Some regulations have been criticised for being overly stringent or ineffective. These challenges highlight the need for a careful balance between ensuring security and facilitating remittance inflows.


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