In a concerted effort to bolster the country’s financial stability and streamline remittances through official channels, the Pakistani government, in collaboration with the State Bank of Pakistan (SBP), has recently signed a Memorandum of Understanding (MoU) with the Arab Monetary Fund (AMF). The partnership is expected to fortify the inflow of remittances through formal banking channels, contributing to the overall economic stability of the nation.
The Arabian countries notably contribute approximately 55 percent of the total remittances to Pakistan. However, the fiscal year 2023 witnessed a decline in remittances, with figures falling to $27.3 billion from the previous year’s $31.2 billion, resulting in a significant deficit of $4.2 billion. This deficit raised concerns, particularly in light of the economic challenges faced by Pakistan at the commencement of the current fiscal year, FY24. Analysts and currency experts suggest that a considerable portion of the deficit might have been channeled through illegal means, possibly being sold in Dubai at inflated rates or transferred through unauthorized networks.
The government’s proactive steps to curb illicit currency activities and smuggling yielded positive outcomes, reflected in the appreciating value of the Pakistani rupee. Building on this progress, the recent MoU with the AMF is poised to be a crucial measure in encouraging a larger proportion of remittances to flow through legitimate channels.
The signing ceremony, which took place in Abu Dhabi, saw the Director General and Chairman of the Board of the AMF, Dr. Abdulrahman Bin Abdullah Al Hamidy, and SBP Governor Jameel Ahmad, formalize the collaboration. According to an official statement by the SBP, the MoU serves to establish a collaborative framework between Buna, the cross-border payment system operated by the Arab Regional Payments Clearing and Settlement Organisation (ARPCSO), owned by the AMF, and Raast, Pakistan’s Instant Payment System.
Buna’s core objective is to facilitate secure and cost-effective cross-border payments in local and international currencies for financial institutions and central banks in the Arab region and beyond. The integration of Raast with Buna is expected to streamline cross-border remittances between the Arab region and Pakistan through official channels, benefiting individuals and businesses by ensuring swift, secure, and cost-effective cross-border transactions.
In his statement, Mr. Hamidy emphasized the significance of the strategic collaboration with Raast, underscoring Buna’s commitment to strengthening economic ties and providing efficient cross-border payment solutions. The SBP Governor, Mr. Jameel Ahmad, hailed the MoU as a crucial milestone that will foster closer ties between Pakistan and the Arab region. He highlighted the integration’s potential to amplify remittances to Pakistan through legitimate channels, ensuring enhanced speed, security, and cost savings in cross-border transactions.
With a substantial population of Pakistanis residing in the Arab region and a significant proportion of remittances originating from these countries, the SBP remains dedicated to expeditiously operationalizing the connectivity between Raast and Buna, fostering robust financial connectivity and reinforcing economic bonds between the two regions.
