KARACHI: Remittances through exchange companies remained robust during the first half of the current fiscal year (FY25), with $2 billion sold to banks and an additional $2bn in the open market.

Pakistan is on track to receive $35bn in total remittances through banks by the end of FY25, with inflows already showing a 33 per cent increase in the first half compared to the previous year.

According to bankers, a stable exchange rate and a government crackdown on illegal currency trade have significantly contributed to the rise in remittances. The open market, previously a hub for unauthorised currency dealings, saw substantial improvement following the 2023 crackdown, benefiting both banks and exchange companies.

`The situation has improved as we have sold $2bn to banks in the first half of the current fiscal year and expect the same amount in the next half,` said Zafar Paracha, general secretary of the Exchange Companies Association of Pakistan (ECAP).

He said exchange companies also sold $2bn in the open market during the same period, indicating no significant shortage of dollars. A major portion of these funds around $800 million was allocated for Haj expenses, along with other major expenditures, including travel, education, immigration, and medical needs.

`The inflows would increase further if the State Bank provides exchange companies with the same incentives offered to banks,` said Mr Paracha.

Currently, banks earn Rs2 per dollar in remittances, while exchange companies receive Rs1 per dollar. `We are in discussions with the government and are optimistic about achieving parity in incentives,` he added.

Remittances from overseas Pakistanis remain the country`s largest source of foreign exchange earnings.

Despite a modest improvement in exports this year, they are still projecte d to lag significantly behind remittances.

During FY24, remittances through banks amounted to $30.25bn, with exchange companies contributing $3.8bn.

The ongoing rise in remittances reflects increased confidence in the formal financial system, partly attributed to the crackdown on illegal currency trade.-Staff Reporter