The State Bank of Pakistan (SBP) has allowed foreign exchange companies to enter into forward sale transactions up to five working days against export proceeds in US dollars with banks to help them manage rate risks.
According to a statement issued by the SBP in this regard, “Authorized dealers may purchase forward the export proceeds in US dollars received from abroad against the export of permissible foreign currencies by exchange companies, subject to adherence of following terms and conditions”.
Additionally, the forward purchase facility may be provided up to a maximum of five working days (including both transaction and settlement days).
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The SBP said that authorized dealers may extend the maturity date, provided that the total period of the forward purchase and the extended maturity period does not exceed five working days including both transaction and settlement days in case they purchase forward the export proceeds in US dollars against the exports of the permissible foreign currencies for less than five working days.
“However, such extensions will be made by closing out the original contract and the booking of a fresh contract at the new rate,” it added, as forward purchase may be booked before or after the export shipment.
The central bank said that exchange companies are required to bring the export proceeds within five working days of the date of shipment. In case a forward purchase is booked on or after the shipment date, the maximum maturity date of the forward purchase facility may be up to the fifth working day of the date of the shipment.
The forward purchase may be booked for the full or partial value of the export proceeds against the export shipment. The forward purchase will be booked based on a specific export shipment, for which the authorized dealers are to obtain a copy of the export documents from the Exchange Companies.
The statement also detailed that “In case of advance booking, copy of confirmed deal ticket shall be obtained from Exchange Companies, while a copy of other export documents shall be obtained subsequent to the shipment,” and that “no substitution is allowed for the settlement of export proceeds”.
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The forward contracts that are not taken up may be closed out on the date of maturity at the prevailing spot rate. The exchange gain, if any, will not be passed on to the exchange company but will instead be deposited in favor of the SBP by an authorized dealer.
Exchange loss is recoverable from an Exchange Company by an authorized dealer. To this effect, the authorized dealer should get consent/agreement signed by the concerned Exchange Company before entering a forward contract.
The exchange gain is to be deposited in favour of the SBP. A consolidated statement regarding all such cases is to be submitted by the head/principal office of the authorized dealers to the Director, the Off-Site Supervision, and the Enforcement Department on a monthly basis.
In addition to the above, authorized dealers may continue to purchase foreign exchange in ready, tom, and spot value dates from exchange companies.
