The government-proposed amendments in the Foreign Exchange Regulation Act (FERA) 1947 seeking explicit powers to Federal Investigation Agency (FIA) to take prompt action against illegal foreign exchange operators as well as to restrict the free movement of foreign exchange within the country are pending with the National Assembly Standing Committee on Finance.
A brief submitted to the Finance Committee of the National Assembly by the Finance Division reveals that the Prime Minister during a meeting held on September 3, 2018 soon after assuming the office desired to curb the practice of Hawala/Hundi and other forms of illegal foreign exchange transactions. The Finance Division was directed to take immediate steps to curb these illegal practices through amendments in the existing laws.
The committee was further informed that foreign exchange policy and operations in Pakistan are governed under the provisions of the Foreign Exchange Regulation Act (FERA), 1947 which empowers the State Bank of Pakistan (SBP) to regulate inflow and outflow of foreign exchange.
However, the State Bank of Pakistan does not have explicit powers under the FERA, 1947 to issue any regulation/instruction relating to the inland movement of foreign currencies and after a series of meetings with stakeholders, some amendments were suggested in the FERA 1947.
The SBP proposed to amend section 23 of FERA, 1947 by enhancing the punishment, making the offence punishable under the section as cognizable and non-bailable, saying new provisos will provide explicit powers to FIA to take prompt action against illegal foreign exchange operators without requirement of any formal complaint from SBP and empower the tribunals to take action against illegal foreign exchange operators in expeditious and time bound manner.
Moreover, a new section 8A is inserted to restrict the free movement of foreign exchange within the country without any limit. Therefore, Foreign Exchange Regulation (Amendment) Act, -2019 duly vetted by the Law and Justice Division, ratified by the Cabinet Committee for Disposal of Cabinet Cases (CCLC) and approved by the Federal Cabinet in its meeting held on December 20, 2018, was introduced in the National Assembly on April 22, 2019 and National Assembly referred the bill to the National Assembly Standing Committee on Finance for consideration.
The standing committee considered the amendment bill in its meeting held on May 02, 2019 and, after detailed discussion, directed State Bank of Pakistan (SBP) to present a comparative analysis of foreign exchange regulation regimes of India, Bangladesh and Pakistan at the earliest; and the governor SBP should attend the meeting personally to explain the proposed amendments in FERA, 1947 and respond the queries of the member of the committee.
The SBP conducted a detailed exercise on the desire of the standing committee and furnished briefs on formal and informal system of foreign exchange in Pakistan as well as measures taken by the government/SBP to strengthen regulation of foreign exchange regime and a comparative statement showing the original text, proposed amendment, present state of foreign exchange regulation regimes of India, Bangladesh and Pakistan and the rationale for proposed amendments for the information and understanding of members of the standing committee.
The proposed law has been pending with the finance committee and was deferred for the second consecutive time after committee members showed concerns on the amendment to restrict the free movement of foreign exchange within the country. The committee asked the Finance Division to suggest a threshold for inland movement of money and urged the SBP to prepare comprehensive presentation on the implementation procedure of the proposed bill.
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