KARACHI: State Bank of Pakistan on Sunday issued a clarification about the rules pertaining to foreign currency accounts released on October 6, saying there has been no change in the general or special permissions given by State Bank to individuals under the foreign exchange regulations.
It said the rules had been issued with the aim to provide a regulatory framework for the operation of individual foreign currency accounts.
“According to paragraph iv, Chapter 6 of the Foreign Exchange Manual, foreign currency accounts can be fed by remittances received from abroad, travelers’ cheques issued outside Pakistan and encashment of securities issued by the Government of Pakistan,” said the SBP statement.
“A foreign currency account of a citizen of Pakistan, resident in Pakistan, can also be fed with cash in foreign currency only if the account holder is a filer as defined in Income Tax Ordinance 2001,” it added.
According to SBP, such a framework represents a continuation of its efforts “to strengthen the foreign exchange regime and make it more market-oriented”.
“Looking ahead, SBP will continue to take steps to facilitate greater use of banking channels for individuals to meet all their foreign exchange needs,” the central bank said.
The bank’s external relations department also released a list of answers to questions frequently asked by foreign currency account holders.
Will Roshan Digital Accounts be impacted?
To a query on whether the new rules affect the recently introduced Roshan Digital Accounts for Pakistanis abroad, the statement said: “No, RDA is a distinct scheme for Non Resident Pakistanis, offering both foreign currency and PKR accounts.”
It was explained that while funds can be received into these accounts from abroad, they cannot be fed from within Pakistan.
“Proceeds of investments, profit thereon and any balances in these accounts are freely repatriable without any approval or hindrance.”
Can foreign currency accounts be credited with money from exchanges?
Regarding whether money obtained from foreign currency exchanges can be deposited into foreign currency accounts, SBP said: “A foreign currency account shall not be credited with any foreign exchange purchased from an authorized dealer, exchange company or money changer, except as allowed by the State Bank through any general or special permission under any law”.
It said that since SBP has already provided general permission for filers to deposit foreign currency into their foreign currency accounts and similarly general permission is also in place for the purchase of foreign currency from exchange companies under the Exchange Companies Manual, filers can continue to deposit cash in their foreign currency accounts.
Will I still be able to send money abroad for my children’s education?
The SBP stated: “Nothing has changed on this front. As per current practice, money for education fee of children can be sent through an individual’s Pak Rupee as well as foreign currency account.”
Detailing the procedure, it said that the bank, on an application from the customer, along with fee voucher, debits the customer’s account and transfers the fee to the educational institution abroad.
“Payment allowed includes application/processing charges, tuition fee, living expenses, etc,” it added.
How will remittances for medical treatment abroad be made?
The central bank said nothing has changed on this front either.
As is the current practice, a bank, on receipt of an application from its customer, along with the invoice of the hospital/clinic and necessary documents, will debit the customer’s account and remit the funds to the hospital/clinic abroad.
Are any measures being considered for freelancers/IT exporters?
SBP said that entities engaged in exports of IT services can open special foreign currency accounts under the existing regulations and can retain up to 35% of their export proceeds for their foreign exchange needs like payment of commission/discount to the overseas agents/buyers, meeting expenses such as promotional publicity, import of hardware/software, foreign consultant’s fee etc.
The central bank said that such business owners can make use of Pakistan Remittance Initiative channels for them to conveniently receive proceeds of their services.
“Freelancers receiving remittances using this channel are also allowed to repatriate up to 35% of the export earnings through their PKR denominated bank account in Pakistan for outward remittances,” it added.
Moreover, freelancers that are engaged in export of their services and receive payment in foreign currency can open special foreign currency retention accounts and retain up to 35% of proceeds from export of services received in foreign currency.