Remittance dealers allege govt not fulfilling contracts

LONDON: British Pakistani money changers are upset that the State Bank of Pakistan (SBP) has repeatedly violated the promises the bank made to the dealers, to the extent that many remittances businesses are at verge of financial ruin.
Money Remittance Association UK, a representatives organization of money exchange dealers, are of the view that when the State Bank of Pakistan set up the subsidy regime for overseas Pakistan, it was agreed that the subsidies would be given out on a monthly basis. As the month of Ramazan approaches and the remittances increase in this month substantially, the concerned money dealers are appealing to the government to addresses their issues and help them discourage the Hawala system.
According to the organization, after initially giving the subsidies on a monthly basis, the banks arbitrarily decided to give them out after two months, and now it is being given after a full calendar year, causing stress to the businesses.
Data recently released by the State Bank of Pakistan (SBP) showed that remittances sent home by overseas Pakistanis rose by 19.5% or $1.97 billion to $12.07 billion in the first 11 months of the current fiscal year compared with $10.10 billion received in the same period of previous fiscal year. UK was amongst the top countries which showed growth during July 2011 to May 2012 as UK’s inflow stood at $1.394 billion.
Syed Qaisar Ali and Haji Riaz, leaders of the organisation, told The News: “This has been having a very detrimental affect on remittance business because as the Rupee lost value against the Pound Sterling and the US dollar exponentially over the past year, the amount of subsidy given has been severely affected.
“The exchange rate for a US Dollar on January 2011 was 85.50, the rate on 14th of May 2012 was 92, having a net loss of 6.5 on each US dollar subsidy. This is having a severe affect on businesses and must be corrected in order for the continued operation of a number of money

remittance businesses.”
A loss on this account may result in a drop in supply of much needed foreign exchange for Pakistan, as a bulk of it is sent by Pakistani expatriates living across the world. They appreciated that the liberal trade policies during the current government have been conducive in achieving substantial growth in a wide array of business fields but he said if the government doesn’t fulfill its promises then the dealers will have no choice but to go for Hawala and Hundi modes of payments.
They warned that if the legitimate way of sending money - and helping Pakistan’s national exchequer - is not encouraged then the flow of money to Pakistan will be severely affected. They said the unilateral steps taken by the State Bank have meant that the legitimate remittance business is under pressure.
The second major issue, they said, is that of the percentage of subsidy divided between the banks and the money remittance businesses, which is currently divided on a 50-50 percentage basis. He said that “one size fits all” policy was discriminatory to the businesses in the UK as this percentage is “being kept on par with places like the Gulf, where the operation expenses are significantly cheaper than in the United Kingdom”.
They said the dealers are losing a lot of money despite the fact that they are remitting record amount of money to the State Exchequer in Pakistan and they also have to face the Financial Services Authority in the United Kingdom.
“The Financial Services Authority is very concerned about the fact that so much of the public money is lying overseas out of their reach and they take this as a serious risk to public funds. As a consequence, we are unable to meet the requirements laid down in the relevant laws in relation to safeguarding the public funds,” they said.
A delegation of money exchange representatives met Rehman Malik, then Interior Minister, during his last visit to London, and conveyed their grievance. Mr Malik assured the dealers that their concerns will be addressed but there has been no follow-up ever since.
When contacted, Advisor to Finance Ministry, Rana Assad Amin, who is also official spokesman, said that the government had released Rs4.5 billion for payment of subsidy amount to State Bank of Pakistan in the last financial year. The government, he said, allocated Rs5 billion for this account during the current fiscal year and they were in the process of releasing the allocated amount to SBP. “We will try to release whole allocated amount of Rs5 billion in one go but it depends upon financial position,” he concluded.