SBP Clarifies Ministry of Finance’s Stance On New Foreign Currency Account Rules

External Relations Department of the State Bank of Pakistan (SBP) has issued a clarification on Foreign Currency Accounts Rules 2020, saying,

On October 6, 2020, the Federal Government issued Foreign Currency Accounts Rules, 2020 under the provisions of the Protection of Economic Reforms Act 1992. There has been no change in the general or special permissions given by the State Bank to individuals under the foreign exchange regulations.

The statement said,

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 Govt. of Pakistan. A foreign currency account of a citizen of Pakistan resident in Pakistan can also be fed with cash foreign currency only if the account holder is a filer as defined in Income Tax Ordinance, 2001. The recently issued rules aim to provide a regulatory framework for the operation of individual foreign currency accounts. Such a framework represents a continuation of the State Bank of Pakistan’s 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.

Upon the issuance of this clarification, many wondered why the Finance Ministry issued an SRO to begin with. In response to this, the SBP said: “Protection of Economic Reforms Act 1992 (PERA) was amended in 2018. The amendments made in PERA included, inter alia, that the federal government may make rules governing deposits into and withdrawals from the foreign currency accounts. The purpose of issuance of these rules is to provide enabling provisions for SBP to issue instructions related to deposits in FCY accounts, including those already in place as well as any that may be issued in the future.

In this way, these rules aim to provide a framework for the operation of individual foreign currency accounts.

In addition, the rules also formalize the mandate given to SBP to strengthen the foreign exchange regime and to make it easier for the individuals to meet their foreign currency needs through banking channels.”

Another important point to note, and as clarified by the central bank, is that these rules have no bearing whatsoever on the Roshan Digital Accounts.