Pakistani banks are expected to pay around $256 million to foreign banks during the current financial year for receiving and processing money sent home by overseas Pakistanis. The development comes after the government stopped providing financial support under a remittance-related scheme that previously helped banks cover these costs.
The matter was recently discussed in a meeting of the Senate Standing Committee on Finance. During the meeting, officials explained that Pakistani banks have to make payments to foreign banks and other overseas financial partners for handling remittance transactions sent to Pakistan.
According to the information shared with the committee, the government is no longer providing funds for this purpose in the current financial year. As a result, local banks will have to bear the cost themselves. The amount expected to be paid this year is around $256 million.
The issue has raised concerns about the future cost of sending money to Pakistan, especially for millions of overseas Pakistanis who regularly send their earnings to support their families back home.
How the Remittance System Works
Foreign remittances are one of the most important sources of foreign exchange for Pakistan. Millions of Pakistanis live and work in countries such as Saudi Arabia, the United Arab Emirates, the United Kingdom, the United States, Canada and several European countries.
These overseas Pakistanis send money to their families in Pakistan every month. The money is used for household expenses, education, healthcare, business, savings and many other needs.
When money is sent through official banking channels, foreign banks, money transfer companies and Pakistani banks work together to complete the transaction. These services involve different costs, including transaction handling, processing and arrangements between Pakistani banks and their overseas partners.
In the past, the government provided financial support to help banks cover some of these costs. This arrangement allowed many remittance services to remain free for people sending money and for their families receiving it in Pakistan.
However, the government has now stopped funding the scheme, meaning banks will have to manage these expenses from their own resources.
$256 Million Expected to Be Paid This Year
During the Senate Standing Committee meeting, officials were told that Pakistani banks are expected to pay approximately $256 million during the current fiscal year for receiving foreign remittances.
The amount represents the charges and costs linked with overseas financial institutions and partners involved in bringing remittance money to Pakistan.
It was also pointed out during the discussion that Pakistani banks have historically paid very large amounts for remittance-related services. Some estimates suggest that the overall annual cost paid to overseas banks and financial partners has previously reached around $800 million.
The current financial burden is therefore significant for the banking sector.
With the government no longer providing money under the previous arrangement, banks will now have to absorb a greater share of these expenses.
Government Ends Financial Support
State Bank of Pakistan Deputy Governor Dr. Inayat Hussain informed the Senate committee about the financial support previously provided by the government.
According to the information shared during the meeting, the government provided Rs. 124 billion in FY2025 under the remittance-related financial support scheme. Another Rs. 72 billion was provided in the following fiscal year.
However, the government later decided to discontinue the scheme from July 2026. No funds were allocated for it in the current fiscal year’s budget.
The decision means that the financial responsibility has shifted from the government to the banking sector.
Previously, government support helped banks offer remittance services without directly placing the full cost on people sending or receiving money. The aim was to encourage overseas Pakistanis to use legal and official channels for transferring money to Pakistan.
Now, the banks will have to decide how they can manage these costs while continuing to offer smooth and affordable remittance services.
What This Could Mean for Overseas Pakistanis
One of the main concerns is whether the new arrangement could eventually increase the cost for overseas Pakistanis.
At present, the goal is to keep eligible remittance transactions free for senders and beneficiaries. However, if banks face a major financial burden over time, there is concern that some costs could eventually be passed on to people using remittance services.
Dr. Inayat Hussain reportedly warned that if banks were unable to make the required payments to their foreign partners, the charges could eventually affect the people sending money to Pakistan.
This would be a major concern because millions of Pakistani families depend on regular financial support from relatives working abroad.
Even a small increase in transfer fees could affect overseas workers, especially those who send money home every month and have limited incomes.
For this reason, the issue is important not only for banks but also for the wider economy and overseas Pakistani community.
Why Remittances Are So Important for Pakistan
Foreign remittances play a major role in Pakistan’s economy. Money sent home by overseas Pakistanis helps increase the country’s foreign exchange reserves and supports the balance of payments.
Pakistan received a record $41.6 billion in workers’ remittances during FY2026, showing the growing importance of overseas Pakistanis to the national economy.
This money also supports millions of households across the country. Many families use remittances to pay for food, rent, electricity, education, medical treatment and other daily expenses.
In many cities, towns and villages, money sent by family members working abroad is a major source of household income.
The importance of remittances has increased further because Pakistan often faces pressure on its foreign exchange reserves and external payments. Strong remittance inflows can help reduce some of this pressure.
This is why Pakistan has spent many years encouraging overseas Pakistanis to use legal banking and money transfer channels instead of informal methods.
Formal Channels Remain Important
The government and the State Bank have introduced several policies over the years to increase the use of official remittance channels.
The main purpose has been to make sending money easier, faster and more secure. Financial incentives were also introduced to encourage banks, exchange companies and overseas financial partners to bring more remittances through official channels.
The Pakistan Remittance Initiative was created to support this goal. Various schemes were introduced over time to improve remittance services and increase the flow of money through formal banking systems.
One important feature of these efforts was the idea of keeping many remittance transactions free for the sender and receiver.
However, after the recent changes, banks will have to bear more of the cost themselves. The challenge will be to continue providing free and convenient services without facing too much pressure on their profits.
Banks Face a New Financial Burden
The end of government support has created a new challenge for Pakistani banks.
Banking institutions will now have to pay foreign partners from their own resources for services related to bringing remittances into Pakistan. This could increase their operating costs and affect their profits.
The Pakistan Banks Association and banking industry representatives have already expressed concern about the extra financial pressure created by the policy change. Banks have said that the cost of bringing remittances into Pakistan could affect their profitability.
At the same time, banks understand that remittances are important for their customers and for the country’s overall economy.
As a result, they are expected to continue working with foreign banks and money transfer companies to ensure that remittance flows remain strong.
The biggest challenge will be finding a balance between covering costs and keeping services affordable for overseas Pakistanis.
Government Support Was Previously Significant
The financial figures shared with the Senate committee show how much government money had previously been used to support the remittance system.
With Rs. 124 billion provided in FY2025 and another Rs. 72 billion in the following year, the government was spending a large amount to support remittance-related services.
The decision to stop this support appears to be part of a broader effort to reduce government spending and change the way financial incentives are provided.
The State Bank had already announced the discontinuation of the Telegraphic Transfer Charges Incentive Scheme from July 1, 2026, while directing authorised dealers to continue providing eligible home remittance services with the scheme’s key features intact.
This means the policy has shifted from government-funded support to a system where banks themselves carry a larger part of the financial burden.
Senate Committee Discusses Possible Impact
The Senate Standing Committee on Finance discussed the issue because of its possible impact on both the banking sector and overseas Pakistanis.
Members were informed about the large payments that Pakistani banks make to foreign financial institutions for remittance-related services.
The committee also discussed the fact that the government had not allocated money for the scheme in the current budget.
There were concerns that increasing costs could eventually affect people sending money to Pakistan.
Senators highlighted the importance of keeping remittance services affordable. Since Pakistan depends heavily on money sent by overseas workers, any policy that makes official transfers more expensive could create new challenges.
If sending money through formal channels becomes costly, some people may look for cheaper alternatives. This could reduce the use of official banking channels, which would not be good for Pakistan’s financial system.
Overseas Pakistanis Continue to Support the Economy
Despite the policy changes, overseas Pakistanis are expected to remain a major source of financial support for the country.
Pakistani workers abroad continue to send billions of dollars home every year. Saudi Arabia, the UAE, the UK, the US and European countries remain major sources of these inflows.
The growing number of Pakistanis working abroad has also helped increase remittance inflows.
For many families, the money sent from abroad is not simply extra income. It is essential for their daily lives. It helps them manage household expenses and deal with rising prices.
For Pakistan, these inflows provide much-needed foreign currency at a time when the country continues to face economic challenges.
This is why the government, banks and the State Bank will need to ensure that the new financial arrangement does not create unnecessary problems for overseas workers.
The Way Forward
The decision to end government financial support means Pakistani banks are entering a new phase in the remittance business.
Banks are expected to pay around $256 million this year to foreign institutions and partners for processing remittance inflows. At the same time, they will be under pressure to keep services efficient and affordable.
The key question will be whether banks can continue absorbing these costs without reducing the quality of services or charging overseas Pakistanis.
The government and banking sector will also need to make sure that official remittance channels remain attractive.
Pakistan cannot afford a major slowdown in remittance inflows because overseas Pakistanis play an important role in supporting both families and the national economy.
The latest developments show that remittance policy is changing. Government support has been reduced, while banks are now expected to take on more responsibility.
For the current financial year, the expected payment of $256 million highlights the size of the burden facing the banking sector. The coming months will show how banks manage these costs and whether the changes have any effect on the amount of money sent home by overseas Pakistanis.
For now, remittances remain one of Pakistan’s strongest sources of foreign exchange, and keeping the system affordable, secure and easy to use will remain important for the country’s economic future.
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