Foreign exchange inflows from overseas Pakistanis through the expensive Roshan Digital Account (RDA) crossed the $2 billion mark in 11 months on Monday and will now require more than Rs13.1bn subsidy to maintain its growth.
“Roshan Digital Account deposits cross $2billion in just 11 months,” the State Bank of Pakistan (SBP) said in a tweet. “As Pakistanis all over the world celebrated country’s Independence Day, #RoshanDigitalAccount crosses the historical milestone of $2bn in deposits,” it added.
The expensive RDA initiative has a brief history of 11 months.
The Economic Coordination Committee (ECC) of the cabinet had last week approved a budgeted subsidy of Rs13.103bn for the current fiscal year for a reward scheme to sustain foreign remittances at last fiscal year’s record of $29.4bn and made RDAs part of the subsidy scheme. The RDA transfers remain in bank accounts rather than being invested in government debt at up to seven per cent interest rate and will entail reward subsidies.
ECC approved Rs13.1bn to sustain remittances growth and made RDA part of subsidy scheme
SBP Governor Dr Reza Baqir had told journalists in Islamabad last week that $29.4bn remittances were an all-time high with a 25pc growth. He had confirmed that the central bank was studying risks but such a growth was not anticipated for the current fiscal year either. Given the expansion in the base, “we have taken a very conservative estimate for the current year” and growth may be even lower than 6pc.
As part of the ECC discussions, Finance Minister Shaukat Tarin, as head of the forum, had asked about the possible increase in remittances or RDAs through the reward-cum-subsidy scheme but got no clear answers, sources said.
Prime Minister Imran Khan had lauded overseas Pakistanis when the RDA inflows crossed $1bn on April 24 and then again when these crossed $1.5bn on June 27.
Since its launch in September last year, the RDA inflows have been increasing as more and more banks joined the scheme. The government considers the RDA inflows as a sign of overseas Pakistanis’ confidence in the economy, while critics have been referring it to lucrative returns and travel bans.
The National Remittance Loyalty Programme (NRLP) approved by the ECC will offer incentives/rewards to overseas Pakistanis for sending remittances to Pakistan based on points accumulation structure. The scheme aims to incentivise remitters to transfer funds through formal channels, thus further strengthening the inflow of remittances.
The scheme being planned for formal launch with effect from Oct 1 envisages 1pc reward points on annual remittance of up to $10,000, 1.25pc on up to $30,000 and 1.5pc reward points on annual remittance of above $30,000.
For example, a remitter of $25,000 a year will be entitled to a reward of about Rs46,575 on the basis of points accumulation structure. This means the first $10,000 remittance will get reward points at the rate of 1pc, followed by 1.25pc on the next remittance of $15,000.
An Android- and iOS-based mobile app (both in English and Urdu) has already been developed for the objective by 1-Link whose development cost has been borne by the banks. The operating cost of this app shall also be taken up by financial institutions. The remitters will be awarded points against each remittance transaction in accordance with the NRLP criteria. The incentives shall be availed through redemption of points.
The NRLP will have three tiers — Green, Gold and Platinum — having added feature of “Virtual Loyalty Card” as a built-in feature. The remitters shall register as primary users and will be able to add one supplementary user as a beneficiary. All home remittances through formal channels are eligible for the scheme, including funds received through RDAs and used and consumed in Pakistan.
Under the initiative, overseas Pakistanis shall be qualified to avail a number of services equivalent to the amount of the awarded points under the NRLP against redemption of the accumulated points. For example, the reward points will be available for use against PIA tickers or payment for extra luggage on its international flights.
The Federal Board of Revenue will also entertain the accumulated reward points on duty payment of mobile phones under personal baggage, tax payment on purchase of locally manufactured vehicles or payment of duty on imported vehicles. Likewise, the point will also be redeemable against renewal of CNIC or NICOPs and passports, life insurance premium payment of State Life Insurance, OPF’s school fee payment and Utility Stores purchases, while separate counters would be set up at airports for priority clearance, placement of standees and banners for promotion, etc.
The estimated financial budget — based on the assumption that remitters equivalent to 25pc of remittances as of FY2021 will register for the NRLP — is Rs13.107bn for FY2022. The budget disbursement mechanism shall be the same as applicable under other incentive schemes for home remittances, whereby participating public sector entities (PPSEs) may submit their claims with the SBP through 1-Link after verification of claims. The SBP will directly disburse funds to the eligible PPSEs after receipt of funds from the finance ministry.
The prime minister had already approved the initiative on July 2 this year as part of efforts for increasing the inflow of foreign exchange into the country.