Forex firms exempted from local remittance restriction

KARACHI: Foreign exchange companies are exempted from a restriction of taking a prior approval of the central bank to remit $10,000 or more from one to another location in the country, a senior official said.

The State Bank of Pakistan (SBP) Executive Director Irfan Ali said the condition is only applicable on individuals who want to carry the foreign currency from one to another city.

“Once a law is in place a mechanism would be devised to address challenges faced by people while transporting foreign currency domestically,” Ali said during a meeting with a delegation of Exchange Companies Association of Pakistan (ECAP).

The SBP’s director warned actions against smugglers of foreign currencies, according to an ECAP’s statement on Thursday.

The government has drafted an amendment into Foreign Exchange Act to link domestic remittance worth $10,000 with an approval from the SBP.

Ali rebuffed reports of closing operations of exchange companies and handing over forex dealing to banks. “Exchange companies are playing key role in inward home remittances,” he was quoted as saying in the statement.

The SBP has already asked banks to deal with walk-in customers who want to exchange foreign currencies. The SBP issued the direction despite the presence of the law because banks were not dealing with walk-in customers. They were asked to do so whether or not a customer has a foreign currency account.

“This initiative would curb foreign currency smuggling and black marketing,” the SBP’s official said. Ali said the central bank wants to give rebate to exchange companies in line with rebate granted to banks. Such initiatives were taken to discourage currency smuggling. He also said the central bank would take all such steps to satisfy the Financial Action Task Force in order to exit from its grey list.

Malik Bostan, chairman of ECAP urged the central bank to evolve a mechanism to avoid shortfall of dollars in the interbank market. The imports of the country stood at $58 billion whereas the exports amounted to $22 billion, showing deficit of $38 billion in the last fiscal year.

Bostan said overseas Pakistanis are contributing around $22 billion a year. Exchange companies are contributing towards improving rupee value and foreign exchange reserves. ECAP chairman said exchange companies have provided $14 billion since year 2010.

“If this amount had been brought through commercial banks then the government would have to pay Rs6/dollar as rebate,” he added. During last three months exchange companies have given $550 million to the government and it has helped in recovery of rupee value, Bostan said.