Govt defaults on remittance rebate

The dollar-hungry but cash-strapped federal government is for months defaulting on billions of rupees rebate to be paid to the commercial banks on account of over $10 billion worker remittances sent back home by the overseas Pakistanis, Pakistan Today has reliably learnt.
The Ministry of Finance (MoF), through the State Bank of Pakistan (SBP), reimburses a rebate or commission of 25 riyals to the commercial banks on the workers’ remittance of each of 100 dollars that, in terms of local currency, amounts to Rs6 per dollar. According to industry sources, it had been for months that the Ministry of Finance had not paid the rebate to the banks.
“The government has not paid the commission for at least last four months,” the sources claimed. The sources in money market, while confirming the report, however stated the government’s default on the rebate’s payment dated back to the last seven to eight months and not four months. “The banks have not received the rebate for at least last eight months,” a dealer in the money market said.
When contacted SBP Chief Spokesman Syed Wasimuddin also confirmed the report saying: “Yes, it was delayed a bit.” The SBP spokesman cited the funds-starved government’s financial constraints when asked to reason the delay in timely clearance of the rebate. “They (Ministry of Finance) say we do not have the budget to pay the rebate,” Wasimuddin stated.
The central bank’s spokesman, however, could not provide details about the size of outstanding rebate. The soft-spoken spokesman, rather, said since the concerned official of the Pakistan Remittance Initiative (PRI) had been kidnapped the required information could not be available. “Our concerned official has been kidnapped,” said Wasimuddin.
PRI Chief Executive Officer Najm-us-Saqib, along with two other high-profile bankers, the SBP’s marketing manager and a director of United Bank Limited, is missing for more than two weeks after, according to police, the three were kidnapped from the Country Club Road. However, one can roughly surmise about the amount the government is defaulting on if calculations are made on the basis of dollars remitted by overseas Pakistanis during the current fiscal year.
The latest data released by the State Bank show that Pakistani compatriots working abroad had remitted a record 10 billion plus dollars through formal channels during the first 11 months of the outgoing FY11. So, according to six-rupee per dollar remittance calculation, the outstanding commission accounts for over Rs60 billion. Divide this amount on monthly basis and the total for eight months would amount to over Rs43.63 billion
That means the cash-strapped federal government is defaulting upon over Rs43 billion to be paid to the local banks on account of rebate on home remittances. When contacted a spokesman of one of the country’s leading banks did not deny that the rebate was unpaid. He, however, was also unable to give the exact amount the Ministry of Finance owed to his bank as a rebate.