Abdul Wajid Khan

The State Bank of Pakistan (SBP) has directed exchange companies to ensure sufficient stock of United States Dollar (USD) at their outlets while exporting surplus currency notes, WealthPK reports. According to an official document of SBP, the exchange companies have been advised to ensure that sufficient dollars are available at their outlets to serve their customers. The short-term mechanism is applicable until September 30, 2022. After the issuance of the instructions by the central bank until September 2, only 10 companies out of 27 have exported approximately $7.12 million in cash, which has been repatriated back into their bank accounts and surrendered in the interbank market.

The SBP issues special permissions to export defaced, small denomination and soiled USD notes. However, the procedure for the export of foreign currency remains the same and the exchange companies have to comply with all the relevant regulations. About the latest general permission to export dollars, the SBP said that recently the supply of USD was increased due to its devaluation. It said that exchange companies bought dollars but demand in the open market was below the supply. Therefore, the exchange companies had excess dollars at their counters, it added.

Consequently, the Exchange Companies Association of Pakistan requested the SBP to allow the export of USD. The exchange companies were allowed to export USD on the consignment basis through cargo and security company, subject to the condition that its 100% proceeds should be brought back into their bank accounts in Pakistan within three days and surrendered in the interbank market on the same day of receipt of such funds. Under section 8(2) of the Foreign Exchange Regulation Act, 1947, SBP issues general or specific permission to, inter alia, take out of the country Pakistani currency notes, bank notes, coins or foreign exchange. SBP has issued general permission to exchange companies to export cash the foreign currency other than the dollar.

The bank has also issued general permission to individuals to carry foreign currency with certain limits. For the age group of up to five years, the maximum limit per person per visit is $1,000 or equivalent to it in other foreign currencies while the annual ceiling per person, in this case, is $6,000. For people from five to 18 years of age, the maximum limit per visit is $5,000 or equivalent to it in other foreign currencies while the annual ceiling is $30,000. For people above 18 years of age, the maximum limit per person is $10,000 or equivalent to it in other foreign currencies and the annual limit, in this case, is $60,000.

However, for individuals travelling to Afghanistan, the per person per visit limit is $1,000 and the per annum limit is $6,000. Under the Exchange Companies Manual, the firms are allowed to export foreign currencies other than the dollar and bring equivalent USD in their foreign currency accounts maintained with banks in Pakistan. The export of foreign currencies is allowed only on a consignment basis through a reputable cargo or security company. Besides, the exchange companies are required to ensure that a minimum of 10% of the dollars received against the export of foreign currencies are sold in interbank on an ongoing basis.

However, the exchange companies are not allowed to export the dollar without the approval of SBP. Under the specific modus operandi and the regulations for the export of foreign currency, the exchange companies collect or purchase foreign currencies from customers through their outlets across Pakistan. These foreign currencies, in cash, are subsequently exported out of the country on a consignment basis through cash in transit (CIT) or security companies.

SBP and Pakistan Customs have joint booths at each of the designated airports. A detailed procedure has been laid down for the export of foreign currency by exchange companies. Before exporting the foreign currency, the companies bring it to the SBP-Customs joint booth where it is opened, counted and verified by officials. The foreign currency is then packed in bundles and sealed. These bundles are then handed over to the cash in transit/security company at the booth for export.

The document, available with WealthPK, says that the exchange companies, exporting permissible foreign currency, are required to repatriate the equivalent amount of dollars in their accounts maintained with banks in Pakistan within five working days. Analysts are also raising concerns about the gap between the open market and the interbank rate of the Pakistani rupee against the dollar. They have urged the SBP to take action to bridge this speculative gap between interbank and market dollar to rupee rate to ease pressure on the local currency.

Credit: Independent News Pakistan-WealthPk