KARACHI: The State Bank of Pakistan (SBP) has issued special foreign exchange regulations for entities operating in Special Technology Zones (STZs) in Pakistan.
The federal government has already issued Special Technology Zones Authority Ordinance, 2020 relating to establishment of Special Technology Zones in Pakistan.
In order to further facilitate the establishment of the Special Technology Zones (STZs) under the Ordinance, the SBP has decided to issue special foreign exchange regulations for entities operating in STZs in Pakistan, in terms of sub-section 5 of Section 19 of the Ordinance and in exercise of powers conferred under the Foreign Exchange Regulation Act, 1947. Accordingly, these regulations will be part of Chapter 6 of Foreign Exchange Manual.
Under the Special Foreign Exchange Regulations for STZs, Authorized Dealers will be allowed to open Special Foreign Currency Accounts of entities licensed by Special Technology Zones Authority (STZA) under the Special Technology Zones Authority Ordinance, 2020.
Such foreign currency accounts can be fed with any proceeds, in favour of the entity, originating from abroad including foreign borrowing, proceeds from exports of goods and services, foreign equity, earnings/profits of overseas offices/subsidiaries/associates established through funds from these accounts, without the requirement of conversion into PKR. However, these accounts cannot be fed with cash foreign currency or any foreign exchange purchased from an Authorized Dealer or an Exchange Company in Pakistan for any purpose.
The funds available in such foreign currency accounts may be used by the account holders for making all types of business related legitimate payments abroad without any limitation and without any approval from the SBP, subject to completion of applicable documentary/reporting requirements under relevant foreign exchange regulations.
In case sufficient funds are not available in Special Foreign Currency Accounts of such entities, with any Authorized Dealer in Pakistan, for making any legitimate payment abroad in foreign exchange, these entities may be allowed to make entire payment of the underlying transaction by purchasing foreign exchange from interbank market, subject to compliance with applicable foreign exchange regulations. However, Authorized Dealers will obtain an undertaking from such entities to the above effect.
According to regulations, in case any local payment is required to be made from Special Foreign Currency Accounts by such entities, the same will be allowed by Authorized Dealers after converting the funds, available in such accounts, into PKR through inter-bank market. However, no cash withdrawal will be allowed in the shape of FCY notes.
The SBP has advised the Authorized Dealers to bring the same to the notice of all their constituents and ensure meticulous compliance.
Copyright Business Recorder, 2020