Pakistan’s central bank on Friday allowed exchange companies to enter short-term forward sale transactions against the receipt of home remittances, in a move that can boost remittance inflows.
Remittances are a lifeline for the cash-strapped South Asian economy, playing a critical role in stabilizing foreign exchange reserves and supporting balance of payments. A forward sale is an agreement to sell an asset, such as commodities, real estate, or securities, at a specified price on a set future date, acting as a hedging tool and allowing parties to mitigate risks of future price fluctuations.
“In order to facilitate Exchange Companies in mobilizing additional home remittances, it has been decided that they may enter into forward sale transactions with authorized dealers (banks) against receipt of home remittances for up to 5 working days,” the State Bank of Pakistan (SBP) said in a statement on Friday.
Exchange companies in Pakistan facilitated $5 billion inflows, while the country received $38 billion in remittances in fiscal year 2024-25 that ended in June, according to local media reports. Zafar Paracha, president of the Exchange Companies Association of Pakistan (ECAP), appreciated the central bank, saying the newly introduced framework reflects the SBP’s “proactive and pragmatic” approach toward strengthening formal remittance channels and improving liquidity management within the sector.
“The initiative demonstrates the State Bank’s commitment to engaging with stakeholders and addressing the genuine challenges faced by exchange companies,” he said in a statement.
“This will not only facilitate better compliance but also encourage increased flow of remittances through formal channels.” In March, Pakistan’s worker remittances were recorded at $3.8 billion, a 16.5 percent increase on a month-on-month basis and 5.5 percent decline year on year, according to the SBP.