ISLAMABAD: Pakistan has received $ 3.16 billion in expatriate remittances through the Roshan Digital Account (RDA) service since its launch in September 2020, Arab News citing the State Bank of Pakistan (SBP).
The RDA service was introduced by the central bank in collaboration with eight commercial banks across the country. The main objective of the service is to enable overseas Pakistanis to open accounts in local and foreign currencies without visiting the country.
Depositors must provide basic information and documents to the online central bank, allowing them to invest in the stock market, real estate and other sectors of the country.
Dr Vaqar Ahmed, senior economist and co-executive director of the Sustainable Development Policy Institute (SDPI) in Islamabad, said the inflows through the initiative had helped build up the country’s foreign exchange reserves at a time when the government was facing a crisis. increase in the current account. deficit with soaring import bills and the depreciation of the rupee.
“The real test of this initiative will come when the rupee stabilizes against the dollar and the government removes tax incentives for real estate investments,” he said. Arab News.
Ahmed said the government could withdraw many tax incentives given to RDA account holders after reaching a deal with the International Monetary Fund (IMF) to revive a $ 6 billion loan program.
“The real challenge for the government is to ensure that this [RDA] program lasting for a longer period of time to get the maximum benefit from it, ”he said.
Central bank data shows that about 68% or $ 2.15 billion of the $ 3.16 billion invested by Pakistanis overseas was in high yield Naya Pakistan (NPC) certificates for sixteen months, with $ 1.19 billion invested in conventional NPCs and $ 957 million invested in Islam. instrument certificates.
A small portion of the $ 32 million investment was seen in the stock market. In December 2021 alone, overseas Pakistanis deposited $ 244 million in the GDR, up from $ 239 million last month.
A total of 322,463 accounts have been opened so far in around 175 counties in various Pakistani banks.
The government has issued NPCs in dollars, pounds, euros and rupees at very attractive risk-free rates and in conventional and Sharia-compliant forms.
On NPC, only a 10 percent withholding tax on profits is applicable. Account holders are not required to submit income tax returns, while Pakistani residents who have overseas assets reported to the Federal Board of Revenue (FBR) can also invest in NPCs denominated in dollars, pounds. and in euros, according to the central bank.
In accordance with the policy of the state bank, the funds in these accounts can be fully repatriated without the prior approval of the central bank.
Haroon Sharif, a former government economic adviser, said the interest rate paid to expatriates through the GDR was “very high” at seven percent in dollars, compared to a mere percent or one percent paid to foreigners. in the West on savings. Sharif said this was the main reason foreign nationals poured money into the GDR.
“At the end of the day, this is a loan to the government but without any conditions, unlike other international lenders,” he said. Arab News.
Sharif said the government should encourage foreign nationals to invest in different projects in Pakistan instead of just giving a loan to get attractive interest rates on their funds.
Dr Nadia Farooq, senior economist and researcher at the University of Georgia, said the GDR’s inflows were helping the country avoid a balance of payments crisis following a growing trade deficit and a bill. import.
“It is the success of the government to have been able to create a new channel to receive flows of overseas nationals other than the traditional remittances,” she said. Arab News.
She urged the state bank, however, to inform the public about the use of these funds and how the interest would be paid back to overseas Pakistanis.
“We should introduce structural reforms in our economy to introduce transparency in our investments, our loans and our spending,” she said, “to get the most out of programs like this.”