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Likely steps to keep remittances flowing

According to a recent World Bank report, remittances to low and middle-income countries are projected to fall by nearly 20 percent. In order to prevent further damage, the government must do everything to keep remittances flowing in times of COVID-19 and beyond. Following are a few actionable measures to keep remittances and development financing flowing:

  1. The remittances should be deemed as an essential financial service so that they can continue operations amidst the pandemic, allowing migrants to continue sending funds. Given the health risks, hygiene and social distancing measures must be in place at agent outlets to ensure that safety is not compromised during pandemic.
  2. Remittance services should be supported by a sound, predictable, and non-discriminatory legal and regulatory framework that will lower remittance costs, improve formal channels of cross-border transactions, mitigate the decline in remittances, and expand the use of digital solutions. An effective regulatory framework should balance innovation and risk during the transition. As providers struggle to maintain operations and sustain business costs, governments could provide concessional lines of credit, and consider temporary tax breaks or waivers on their operating expenses and fees. Governments could become more vocal in advocating the digitization of wage payments, which would avoid precarious in-person transactions and result in time and cost savings.
  3. To encourage the use of digital remittance channels, a number of critical access issues must be addressed first — the most critical of which is the issue of ‘know-your-customer’. Today, in order to open a digital account such as a mobile wallet, regulations in many countries require physical IDs and customer signatures. In times of social distancing, these present health and safety risks. Allowing electronic signatures for low-value transaction accounts, would not only reduce compliance costs but would enable migrants to use the service more easily.
  4. Ensuring senders and receivers access to digital channels is critical to keep remittances flowing during lockdowns and limited mobility. Those with limited digital access are often the ones who rely on remittances the most. These people often depend on informal remittances, carried back by migrants when they travel. To counter this, access to formal remittances channels should be enabled by supporting innovative digital remittance products that will also pave the way for migrants and their families to get savings and insurance.
  5. A tax credit could be offered to remittance service providers equal to the reduction in fees paid by remittance senders and recipients.
  6. Increase market competition in the remittances industry.
  7. Setting up a structured, international effort to improve the data on remittances in the medium-term.
  8. Using remittance flows as collateral for credit enhancement.


The government of Pakistan has already responded well to most of the suggestions above. A “National Remittances Loyalty Program” is in the offing through which various incentives and exemptions have been announced for overseas Pakistanis, salient features of which are as under:

Under the incentives package, withholding tax will be exempted from July 1, 2020 on cash withdrawal or on issuance of banking instruments/transfers from a domestic bank account to the extent of remittances amount received from abroad in that account in a year. NRPs will be offered debit and loyalty cards, in addition to a smartphone-based incentive product. Moreover, a special application similar to Vouch365 will also be launched to facilitate them. Under the program, children of overseas Pakistanis sending remittances home will be given 50 percent discount in Overseas Pakistanis Foundation (OPF) School and college fees and a special quota will also be allotted to the expatriates in the OPF housing schemes. Exemption of the immigration fees, insurance premiums and registration fees for the overseas Pakistanis is also on the cards. In addition, recommendation to open a separate counter for overseas Pakistanis at the international airports is also under consideration where they will be given clearance on priority basis on their arrival and departure.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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