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980721

STATE BANK OF PAKISTAN FOREIGN EXCHANGE DEPARTMENT KARACHI

F.E. Circular No. 42
21^st July, 1998

All Authorised Dealers in Foreign Exchange.

Dear Sirs,
FOREIGN CURRENCY ACCOUNTS-U.S. DOLLARS SAVING BONDS

In supersession of the relevant instructions issued from time to time on the subject of operation of Foreign Currency Accounts (FCAs), affected by F.E. Circular No. 12 of 1998 (as amended from time to time) it has been decided as follows:-

1. FCAs will continue to remain subject to the limitation on withdrawal in foreign exchange except in the exempted categories. However, as announced before the deposit holders are at liberty to convert them in rupees at the State Bank’s official buying rate.

2. In addition to the above, the holders of these accounts will be permitted to purchase U.S. Dollar Savings Bonds of the Government of Pakistan against the outstanding balances in their Foreign Currency Accounts. These Bonds will be for the tenure of 5, 7 and 10 years and will bear profit as per the details given below:-

5 years	6 months’ LIBOR
7 years	6 months’ LIBOR plus 1%
10 years	6 months’ LIBOR plus 2%

The Bonds will be issued in the denomination of US$ 100, US$ 1,000, US$ 10,000 and US$ 100,000.

3. The amounts of profit on the Bonds will be payable to the residents in Pakistan rupees at the State Bank’s official buying rate. The payment of profit of the non-residents will be in US Dollars. The profit will be paid to the holders at half-yearly intervals. The principal amount would be payable both to residents and non-residents in US Dollar.

4. These Bonds will be issued by the Authorized Dealers on behalf of the Government. the detailed procedure of sale/purchase of the Bonds is being separately notified to the Authorised Dealer.

5. The Bonds will be transferable by endorsement and delivery tradable in the market.

6. Bonds can be used as collateral for obtaining loans in Pakistan.

7. Bonds shall not be encashable in dollar before the date of maturity. The holders of the Bonds will, however, be free to encash the bonds in rupees any time before the maturity date at the then prevailing official exchange rate.

8. The foreign currency bonds and the proceeds thereof, shall be exempt from levy of Wealth Tax for a period of six years and shall enjoy immunity from divulging the source of foreign exchange.

9. The investments made in these Bonds and profit earned thereon shall be exempt from Income Tax and deduction of Zakat.

10. There shall be no maximum limit for the purchase of these bonds.

11. The face value of the Bonds shall be encashable on maturity in US Dollar.

12. Till the stock of the Bonds is got printed and supplied to the Authorized Dealers, temporary receipt will be issued by the Authorized Dealers for the purchase of such bonds which will be exchanged with the Bonds as soon as those become available.

13. The Bonds will be registered bonds and in case of their issue to the non-residents, their export will be allowed.

14. In case of issuance of these Bonds against the balance held in the foreign currency accounts upto 30-6-1998 and interest earned thereon, the Authorized Dealers, simultaneously with the issuance of temporary receipt/Bonds, will pay to the State Bank the rupee equivalent of the US Dollar amount of the Bonds at the exchange rate at which forward cover was obtained from the State Bank and will get the relative amount of the forward covers cancelled. State Bank will refund the forward cover fee paid by the Authorized Dealers for the unexpired period of the covers, if any. In cases where no forward cover was taken by the Authorized Dealers against the deposits, rupee payment will be made to SBP at the official buying rate obtaining on the date of transaction.

15. For issuing the US Dollar Bonds, the D.M/J. Yen/P. Stg. amounts of the foreign currency deposits will be converted into US Dollar by crossing the State Bank’s spot buying rate for US Dollar with the rates of these currencies published by the Foreign Exchange Rate Committee for "foreign currency accounts."

Yours faithfully,

(MUHAMMAD MAHMOOD AHMAD)
Joint Director

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