Currency manipulation: Inquiry to be completed by month-end, says SBP

ISLAMABAD: Governor State Bank of Pakistan (SBP) Jameel Ahmad Friday informed the Senate panel the inquiry against manipulation of currency with the alleged involvement of banks for earning lofty profits would be completed by the end of ongoing month.

Minister of State for Finance Aisha Ghous Pasha asked the SBP for imposing the maximum penalties against those commercial banks found involved in minting billions of rupees in order to place “effective deterrence”.

Governor SBP Jameel Ahmad told reporters at the conclusion of the meeting of Senate Standing Committee on Finance the SBP took administrative measures to control outflow of dollars. “We imposed limits of $30,000 payment through credit cards and estimated that this step could save $500 million out of total payments of $1.4 billion on per annum basis,” the governor said.

He further said the ongoing inquiry had been expanded to more banks. Initially, the central bank had issued show-cause notice to eight commercial banks. He said the SBP did not revise the upward current account deficit projection for the current fiscal year and it would remain to hover around $10 billion.

Earlier, the Senate Standing Committee held its meeting under the chair of Senator Saleem Mandviwalla at the Parliament House. Some senators asked the government to cancel the license of those banks found involved in the alleged manipulation of currency.

In its written reply, the SBP told the panel review of the sale/purchase transactions of inspected banks suggested overall increase in forex income of the banks was mainly driven by higher spreads due to heightened volatility. “This has been viewed seriously, and as such, SBP has initiated enforcement action by issuing show-cause notices to the inspected banks. After completion of due process, enforcement action will be taken accordingly,” the reply said.

Governor SBP told senators the central bank issued instructions to clear Letters of Credit (LCs) of $100,000 which were pending owing to decreased foreign exchange reserves. He said the remittances out of export proceeds could be obtained from the banks provided reasonable premiums offered by the banks. He said 80 percent LCs were cleared while the remaining required clearance of the central bank.

The Senate panel was informed 2,800 containers were stuck at the Port, out of which 640 possessed hazardous material and wheat. Chairman of FBR Asim Ahmed said their revenues were involved and clearance of containers could not be done because of LCs restrictions and nonpayment of demurrage.

The Member Customs told the committee there were 100 percent surcharges imposed on these containers. The committee members asked the government to resolve this issue through coordination among the FBR, SBP and the port authorities.

The meeting commenced with a detailed discussion on the harassment felt by law-abiding, tax-paying citizens of Pakistan due to loopholes in the online system introduced to facilitate filing of tax returns.

Senator Kamil Ali Agha narrated the case of his being issued notice 111, the final notice, after which no remedy was available. He urged the committee to look into the matter and ensure these tactics wielded by the FBR are curbed. He shared details of his online tax returns with the committee that was filed before the deadline.

Discussing tobacco taxation whereby the government imposed Rs390 per kg advance withholding tax on tobacco, Senator Dilawar stated it was meant to close down the domestic players on the wish of two multinational giants. The committee did not inquire from the FBR why the domestic players were opposing such a tax, which was adjustable and they could get back when final tax liabilities were settled. Minister of State for Finance and Revenue assured the committee all efforts would be made to ensure that matters take the right course.

Reviewing the Point of Public Importance raised by Senator Kamran Murtaza regarding termination of employees on daily wages recruited by Customs Department in Balochistan, the committee took serious notice of the issue and raised questions regarding minimum wage. The committee directed the Customs Department to share all details of the employees and said this was a violation of the quota system as well.

While taking up the matter of import of vintage cars in Pakistan, the committee was of the view that unnecessary restrictions in this regard were uncalled for and efforts must be made to facilitate this trade.

The committee was informed there were no restrictions imposed by the Ministry of Finance and Revenue and that the matter pertained to the Ministry of Commerce.