The Economic Coordination Committee (ECC) of Cabinet on Wednesday approved the National Remittance Loyalty Programme (NRLP) of around Rs14 billion for the current fiscal year.
Under NRLP, the government will take measures to incentivize non-resident Pakistanis (NRP) to send remittances via formal channels as it will help the government maintain the current account of the country.
It is worth mentioning that while the current account was in surplus for many months, the month of June witnessed a downward turn for the country as according to the State Bank of Pakistan (SBP) data, the current account deficit (CAD) for June 2021 increased from $650 million in May 2021 to $1,644 million in June 2021.
In the meeting presided by Finance Minister on Wednesday, there was a consensus that as the economy is going to open, and growth activity is increased in the country, the CAD is likely to increase, and thus the increased remittances could counter it.
After due deliberations, the committee approved the structure and estimated financial impact of the NRLP with a view to incentivizing NRPs to use formal channels to send their money to Pakistan.
Among others, Federal Minister for Interior Sheikh Rasheed Ahmed, Federal Minister for Privatisation Muhammadmian Soomro, Federal Minister for Energy Hammad Azhar, Federal Minister for Planning and Development Asad Umar, Advisor to the PM on Commerce Abdul Razak Dawood, Advisor to the Prime Minister on Institutional Reforms and Austerity Dr. Ishrat Hussain, SAPM on Power and Petroleum Tabish Gauhar, SAPM on Finance and Revenue Dr. Waqar Masood, federal secretaries and other senior officers participated in the meeting. Chairman SBP Dr. Raza Baqir also joined by video link.
Read More: ECC approves a 53pc increase in the price of necessary items
How it works
Dawn reported what the scheme would look like, and according to the report the NRLP envisages 1pc reward points on annual remittance of up to $10,000 equivalent, 1.25pc reward on up to $30,000 of annual remittance, and 1.5pc reward points on above $30,000.
Reportedly, the process will be done through the mobile app, which has already been developed to achieve the objective by 1-Link. The development cost of the app has been borne by the banks.
The operating cost of this Mobile 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 above. The incentives shall be availed through the redemption of points.
The points can then be redeemed at different places, such as to obtain PIA tickets among other things.
The application will reportedly be formally launched by the end of October 2021.
High CAD not worrying: Dr. Baqir
Speaking at a session on ‘Ensuring Sustainable Growth and Promoting Digitisation’ on Wednesday, Chairman State Bank of Pakistan Dr. Raza Baqir said that the high current account deficit for June 2021 was a surprise for the market and businessmen, however, people need not worry as the exchange rate remained unaffected, reserves are increasing and current account deficit is sustainable.
He said that the alarm bells should rise if these three things are happening when the current account deficit (CAD) is rising.
First, the exchange rate should respond to the CAD and if it does not it means the exchange rate has been artificially managed which is a negative symptom for the economy.
Secondly, Dr. Baqir said the CAD size also matters. The country expects the CAD to be in the range of 2 to 3pc of GDP in the current fiscal year, which is not much higher as compared to 6pc in 2018 when it widened to $19bn.
Read More: PTI hits back at PML-N’s claims of ruining Pakistan’s economy
Lastly, he said that if the foreign exchange reserves decrease with the increasing CAD, it is the cause of concern. In the case of Pakistan, the foreign exchange reserves have been increasing, so that is also not worrying.