1liberlization of foreign exchange regime

8/3/2019 1Liberlization of Foreign Exchange Regime

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Balance of Payment

y Current Account Balance

y Export Import = Balance of Trade

yServices Net

y Income account

y Un-requited transfers

y Capital Accounty Loans

y Investment

y Adjusting entries



Sources of Guidance for Foreign Exchange Regime in

Pakistan

1. Foreign Exchange Regulation Act, 1947.

2. Foreign Exchange Manual (8th Edition).

3. Booklet of Instructions

4. FE Circulars/ Circular Letters.



State Bank has shifted its posture from a

control culture to monitoring and

guidance culture.

Significant steps that have been taken

include delegation of authorities to the

Authorised Dealers.

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Liberalization of Forex Regime

Initiativesy Authorized Dealers can designate their own

branches to deal in FX without approval of SBPonce their H.O. obtains such a license.

y Banks have been granted a general permission to

allow conversion of Foreign Currency to PKR atany of their branches.

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y Importers/exporters are allowed to contract for bestrates with any bank.

y

Spread between buying & selling rates were reducedfrom paisa 50 to 20.

y Authorized Dealers were authorized to approve therequests of Advance Payment remittance upto theextent of 100% of the estimated C&F or FOB value

of the goods being imported against letter of creditsubject to the condition that shipping documents

will be submitted within 4 months.

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Authorised Dealers have beenallowed to release the documents to

the exporters for dispatch directly totheir buyers/consignees in case 100%advance payment is received againstexports from Pakistan.

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y Authorised Dealers have been given generalpermission to release foreign exchange upto a

maximum of US$100,000/- or equivalent per invoicefor private sector companies incorporated inPakistan, for payment on account of utilization of I.T. Services.

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y Authorised Dealers have beenempowered to allow forward cover forless than one month for Import, Export& foreign private loans.

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Powers delegated to Authorized Dealers

for releasing payment for invisibles likeprivate or government business travel,education and medical treatmentabroad after due verification of

documentary evidence.

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Permission to foreign controlled

companies for local borrowing to meettheir working capital requirementsubject to observance of PrudentialRegulations.

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A bolishment of requirement of surrendering of FE-31 (incremental)

deposits with State Bank.

No fresh forward cover or roll over of theexisting cover is allowed. AuthorizedDealers have taken-up their forward coveron incremental deposits.

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Powers delegated to

Authorized Dealersfor allowing Shipping Companies to

open Special Foreign Currency A ccountprovided no cash deposit or cash withdrawals are made into/from theseaccount.

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Shipping Companies/ A irlines havingoffices in Pakistan or operating theirships/airlines in Pakistan can open andoperate profit bearing Pak R upee accountsin Pakistan with the condition that profitso earned would not be remittable but can

beu

sed for meeting local expenses.

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Exempted Pakistani local owned

companies working as agents of foreignshipping companies, airlines, cargoconsolidators & courier servicescompanies from registrationrequirement from BOI.

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Eliminated the requirement of submissionof Statement for post facto approval

checking in respect of remittance of surplus passage on foreign airlines.

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Delegated powers to Authorized Dealers foreffecting remittances of aircraft lease rentalsupto the guaranteed hours by the A irlinesIncorporated in Pakistan. Beyond guaranteedhours FEOD is empowered to approve theremittance.

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Authorized Dealers have been allowed

to issue FCY T.C.s against surrenderingof an equivalent amount of FCY for any purpose (maximum limit US$10,000/-).

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NGOs & UN welfare Organizations were allowed to take out of Pakistanforeign currency in excess of limit of US$ 10,000/- & Rs. 3,000/- to

A fghanistan subject to certain terms& conditions.

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A llowed pre-payment of foreign private

debt.

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Export of educational course books forschools and colleges for Pakistani studentsand others running under respectiveEmbassies have been made exempt from E-Form procedure.

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Local US$ Instruments Collection and

Settlement System (Clearing House) hasbeen established w.e.f. January 2004 forfacilitation and cost/time saving.

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Liberalization of Forex Regimey Utilization of FE- 25

yBanks are allowed to freely utilize theirFE 25 deposits in trade related

activities like trade loans for Import orExport. However, this has to besanctioned under various circulars

specifically issued for FE-25 loans. Thisfacility has enhanced bank's ability toearn more on FE-25.

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Types of FE 25 Loans for Exports

yPre-shipment Loans

yPost-shipment Loans

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Maximum Tenure for FE 25 Loans

y Initially each loan was allowed for amaximum period of 180 days

yNo substitution of Contract or L/Cs wasallowed.

y Subsequently, substitution of contract with

another contract or L/c was allowed.yHowever, maximum tenure was fixed at 180

days.

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Settlement of FE 25 Loans against Exports

yFE 25 loan should be settled throughrepatriation of export proceeds.

y In case export is not realized, exportershould bring in proceeds throughinward remittance.

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1liberlization of foreign exchange regime

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