In a major move to increase foreign inflows the State Bank of Pakistan on Wednesday allowed Exchange Companies to export cash in three major currencies UK Pound Sterling, Euro and UAE Dirham and import equivalent dollar against export. Ban on the export of these currencies was imposed by the State Bank on May 9, 2008, when Pak rupee against the dollar was rapidly depreciating.
However, since than exchange companies were repeatedly asking SBP for lifting of ban to enhance the inflows of dollar in the country. Finally on Wednesday, after one and half year ban SBP formally has announced to withdraw the ban and allowed exchange companies to export all currencies excluding US dollar from Karachi and Lahore. However, exchange companies would be bound to import dollar of same value within three days. However, ban on Nostro Account with banks abroad will continue and all permissible inflows/outflows of Exchange Companies to be routed only through FCY Accounts maintained with Commercial Banks in Pakistan.
"Exchange Companies are invited to Para 3 of F E Circular No 4 dated May 9, 2008 whereby Exchange Companies were disallowed to export cash in UK Pound Sterling, Euro and UAE Dirhams. It has, now, been decided to withdraw the said instructions with immediate effect, said SBP circular FE No1.
The Exchange Companies established under F E Circular No 9 of 2002 will, therefore, be allowed to export all types of FCYs other than US Dollars as per prescribed procedure and declaration at SBP-Customs Joint Booths located at Jinnah Int'l Airport, Karachi and Allama Iqbal Int'l Airport, Lahore, it added.
The Exchange Companies will, however, ensure to receive the equivalent US Dollars against exported currencies in their foreign currency accounts maintained with banks in Pakistan within 3 working days, the circular said and added that evidence to this effect should immediately be submitted to this department against each shipment.
Sources said that a high level meeting among the newly appointed Governor State Bank of Pakistan (SBP) Dr Shahid Kardar and Exchange Companies Association of Pakistan (ECAP) was held at SBP head office on January 7, 2011. Although the meeting discussed various issues including withholding tax, delay in agreements, exports of currencies etc. However, lifting on ban on cash export of currencies was main agenda and a joint committee was also formed in the meeting to resolve these issues.
First meeting of joint committee was held on Wednesday at SBP with the chair of Samar Husnain director exchange policy department SBP and attended by Malik Bostan chairman Exchange Companies Association of Pakistan (ECAP), Haji Haroon, Zafar Pracha and others.
During the meeting a numbers of issues were on table, however cash export of three currencies were resolved and after the meeting SBP has formally issued circular, they added. Malik Bostan Chairman ECAP has also welcomed the SBP's decision and said that it will bring more dollars inflows in the country.
He said that banks were charging insurance, cash handling, and transport charges on the purchase of these currencies, of which exchange companies were facing losses. However he hoped that with this decision not only exchange companies will earn profit but at the same time foreign inflows would surge and make exchange rate stable. Bostan has also sought Governor SBP help to resolve the ministry of finance and Federal Board of Revenue related issues.