In May 1998 the Government of Pakistan after its first nuclear tests declared an emergency throughout country thus freezing all foreign currency accounts and suspending all kinds of foreign currency transactions. Main purpose of this declaration was to plug outlets used for foreign currency transfer. However foreign currency accounts maintained by diplomatic missions accredited to Pakistan, their nonresident employees, all international organizations were not affected. Furthermore restrictions did not apply to special foreign currency accounts allowed to be opened by firms/companies in Pakistan for receiving foreign equity and foreign currency loans for purpose of import of plant and machinery, and to foreign currency accounts opened by independent power projects. Note: All these restrictions have been removed. State Bank of Pakistan (“SBP”), through its Circular No. FE/8, has adopted market-based Unified Exchange Rate System, under which SBP fixes exchange rate for foreign currencies on daily basis, and all scheduled banks are then allowed to convert currencies on those rates. Supreme Court, in its judgment in Civil Appeal No. 319 of 99, has ordered Government to make arrangements to lift restrictions imposed on foreign exchange transactions under Foreign Exchange (Temporary Restrictions) Act, 1998, as same are unjustified and without authority. In view of this decision, and fact that country’s economic condition has improved reasonably since imposition of emergency, it is hoped that total restrictions will soon be lifted. In this regard, Foreign Currency Accounts (Protection) Ordinance 2001 was promulgated on Sept. 28, 2001. This provides complete protection of foreign n currency accounts and stipulates that no person holding foreign currency account shall be deprived of his right to hold or operate suchaccount or in any manner be restricted from, temporarily or permanently, lawfully selling, remitting, transferring,using as security or taking foreign currency from within or outside Pakistan. Protection provided under this Ordinanceis in addition to, and not in derogation of, protection provided under Protection of Economic Reforms Act 1992.
Exchange Control is regulated by the Foreign Exchange Regulation Act of 1947 as am’d by F.E.R. (Amend.) Act 1973 and 2002. It covers payments and dealings in foreign exchange and securities and import and export of currency and bullion. No person except authorized dealer and exchange companies may deal in foreign exchange without previous general or special permission of State Bank. This includes buying, borrowing, selling, lending or exchanging any foreign exchange with any person who is not authorized dealer. State Bank may on pplication made to it authorize any company registered under Companies Ordinance 1984 to deal in foreign exchange. Authorized dealers, money changers and exchange companies are now free to determine exchange rates for conversion of Rupees into any foreign currency and vice versa. Effective Aug. 1991, under general permission of State Bank all individuals, companies including investment banks and registered firms may have and freely operate foreign currency bank accounts in Pakistan without restriction save that exports proceeds and earnings on account of services, commissions etc. may not be credited to such accounts. Foreign currency may now be held, exported and imported without restriction and such bank accounts are free from all other exchange control regulations. If foreign exchange is acquired from authorised dealer under general or special permission of State Bank for special purpose it must be used for that purpose and that purpose only or else sold to authorized dealer. Foreign national resident in Pakistan is deemed to be nonresident for purpose of Act. Federal Government has right to acquire foreign exchange by way of sale or assignment but not at price less than market rate of foreign exchange which is still exercised in respect of export proceeds and earnings of residents on account of services, commissions and the like. No acquisition can be made of any foreign exchange owned by authorized dealer and retained by him with permission of State Bank. Restrictions exist on import and export of gold or silver jewellery or precious stones. As regards transfer of securities to person resident outside Pakistan which, for this purpose, includes foreign national for time being resident in Pakistan and company registered in Pakistan which is controlled, directly or indirectly, by person resident outside Pakistan and control of Pakistani companies by such person, see topic Corporations Companies), subhead Foreign Exchange Regulation Act 1947. Federal Government may acquire foreign securities in same manner as it may foreign exchange. No person resident in Pakistan may, except with State Bank permission, settle any property otherwise than by will, upon any trusts under which person who at time of settlement is resident outside Pakistan elsewhere than in territories indicated by State Bank will have interest in property, or may exercise power under said trust, and any such settlement or exercise of power is void to that extent.
Nonresidents are allowed to trade freely in Federal Investment Bonds (FIB’s) and Treasury Bills (TB’s) in secondary market through Special Convertible Rupee Accounts. Nonresident shareholders have choice of receiving dividends in US Dollars or in currency of country in which they reside if designated Authorised Dealer is maintaining account in that currency. Investment by nonresident Pakistanis (including overseas Pakistanis) are allowed on repatriable basis in corporate debt instruments viz Participation Term Certificates (PTC’s) and Term Finance Certificates (TFC’s) etc.
Federal Government or State Bank may at any time by notification in Official Gazette direct owners of foreign exchange to make returns thereof to State Bank and supply particulars thereof. Federal Government may, by notification in official Gazette, direct citizens of Pakistan resident in Pakistan, or any class of such citizens, to make within such time, and giving such particulars as may be specified in notification, a return of any immoveable property or any industrial or commercial undertaking or company outside Pakistan, held, owned, established or controlled by them or in which they have any right, title or interest. Rights of entry and seizure exist in cases of suspected contravention of Act but action may be taken only on representation in writing supported by a statement on oath from informer, or subject to authorization in writing by Federal Government or State Bank a person may, for purpose of making an inquiry which he considers necessary for purposes of this Act, enter any place and call for and inspect any accounts, books or other documents kept in such place.