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Curbs on forex remittances removed

State Bank scraps all forex controls

RECORDER REPORT

KARACHI: The State Bank on Thursday removed all restrictions on foreign exchange remittances sent abroad.

The decision was taken at a meeting in the State Bank which was attended by the top executives of foreign and local banks, and SBP Governor Dr. Ishrat Husain and Finance Minister, Shaukat Aziz.

"The bank has removed the restrictions on remittances of foreign institutional investors which previously required prior approval of the State Bank," announced the State Bank.

The restrictions had been imposed on all kind of remittances of foreign exchange on May 28, 1998 when Pakistan tested its nuclear capability.

A a number of them were gradually removed. In January-2000, the powers of banks were restored with regard to remittances of profits, dividends on foreign direct investment as well as payment of principal and interest on foreign loans incurred by the private sector.

With the removal of the remaining restrictions on Thursday Pakistan has once again become an open and liberal country for foreign investment and attained its pre-May 1998 status.

The new steps have restored the powers of banks (Authorised Dealers in foreign exchange) to allow remittances out of Special Convertible Rupee Account (S.C.R.A.) with immediate effect.

Banks maintaining S.C.R.A. as well as offering custodial services to the same investors are now free to allow outward remittances without State Bank's prior approval from S.C.R.A. for disinvestment proceeds, dividend and brokers' commission for transactions taking place on or after March 30, 2000.

The State Bank has also permitted the banks to allow remittances in respect of the commission earned by the international brokers from their overseas clients and credited net of taxes to the broker's SCRA account, provided funds so credited have emanated from inward remittances or paid out of SCRA of the investor.

The State Bank says that this action is in line with its continued efforts to attract more foreign investment into the country.

The finance minister while talking to newsmen later, commented that the latest move of the State Bank will restore the confidence of the investors.

He expressed the hope that with the lifting of all restrictions, the country will receive more foreign investment.

"In the last couple of month, 50 million to 70 million US dollar came in the stocks business which shows the sign of restoration of the confidence," he said.

Pakistan has a reserve of about 1.5 billion US dollar which is unsatisfactory.

The forex experts said that by lifting all restriction on the movement of the foreign exchange, the government has taken a calculated risk.

"It may work or not, this is linked to the future payment deals of the country with its donors including the IMF, World Bank and several consortia," said an analyst.