SBP allows ECs to do 5-day forward sales against remittances

KARACHI: The State Bank of Pakistan (SBP) has allowed Exchange Companies (ECs) enter into short-term forward sale transactions with Authorised Dealers for up to five working days against the receipt of home remittances, in a move aimed at boosting inflows and improving liquidity management.

The decision comes as part of amendments to Chapter 7 of the foreign exchange regulations, with sub-para 7 I(d) revised and a new sub-para 7 II introduced to streamline the framework.

“In order to facilitate Exchange Companies in mobilising additional home remittances, it has been decided that they may enter into forward sale transactions with the Authorised Dealers against receipt of home remittances for a period up to 5 working days”, a circular issued by the SBP said on Friday.

Previously, forward sale transactions were not allowed to the ECs and were required to surrender dollars on the same day, limiting their flexibility.

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As per SBP regulations, ECs are required to surrender 100 percent of FCY, received on account of inward home remittances, in equivalent US Dollars, in the interbank market, regardless of the forward sale facility availed.

The EC may enter into forward sale transactions against the receipt of inward home remittances with the Authorized Dealers subject to some terms and conditions.

Forward sale facility may be availed for a maximum period of five working days and the forward contract must be squared on the maturity date. In case the forward sale transaction is for less than five working days, forward sale contract period may be extended provided that the total period of the contract, including the extended period, does not exceed five working days.

Forward sale may be booked based on the anticipated inflow of home remittances scheduled till the settlement date. For this, the Company will submit a copy of previous fifteen days’ advices (swift copy) from MTOs, and the tentative frequency of FCY receipts from MTOs to the Authorised Dealer. The daily average of inward remittances received over the preceding fifteen days will serve as the per day benchmark for determining the amount of forward sale contract.

In addition, in case of short realisation, settlement of booked forward transaction may be carried out with other FCY funds available with the Company. However, in no circumstances should this replenishment exceed 10 percent of the deal amount of forward transaction. Forward contracts, which are not taken up, will be closed out on the date of maturity at prevailing spot rate in accordance with the terms and conditions as agreed between the Company and the Authorised Dealer.

SBP has warned that any misuse of this facility, including but not limited to acts such as market manipulation by way of repeated closing out of deals due to excessive forward selling, shall attract strict penal and enforcement action by SBP under relevant provisions of laws, rules and regulations.

Zafar Paracha, President of the Exchange Companies Association of Pakistan (ECAP) has expressed his sincere appreciation to the Governor SBP Jameel Ahmad and his team for introducing a structured and transparent mechanism for the forward sale of inward home remittances. He said that the newly introduced framework reflects SBP’s proactive and pragmatic approach toward strengthening formal remittance channels and improving liquidity management.

Paracha highlighted that allowing exchange companies to undertake short-term forward sale transactions, based on actual remittance trends, will help reduce market uncertainties, improve operational planning, and enhance efficiency in foreign exchange management.

The requirement of surrendering 100 percent of foreign currency in the interbank market ensures transparency while supporting the country’s foreign exchange reserves, he added. “The initiative demonstrates the State Bank’s commitment to engaging with stakeholders and addressing the genuine challenges faced by exchange companies. This will not only facilitate better compliance but also encourage increased flow of remittances through formal channels.”

On behalf of the exchange companies, Paracha has extended his gratitude to the Governor SBP and his entire team for their continued support and constructive policy measures aimed at strengthening Pakistan’s financial system and promoting inward remittance growth.

Copyright Business Recorder, 2026