New rules bring no change to forex accounts access: SBP

A day after news reports appeared about a new SRO issued by the government regarding rules about access to foreign currency accounts, the State Bank of Pakistan said in a circular that nothing has changed.

"There has been no change in the general or special permissions given by the State Bank to individuals under the foreign exchange regulations," said the circular issued by the central bank.

The Foreign Currency Accounts Rules were issued on Oct 6 by the government under the Protection of Economic Reforms Act, 1992. Confusion arose since the wording appeared to suggest that the rules have banned depositing of foreign exchange purchased from the open market into FE-25 foreign currency accounts.

Return filers can still deposit foreign exchange from the open market into their accounts

But the State Bank said the new rules notified by the government are the same as the old rules mentioned in the bank's Foreign Exchange Manual.

"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 SBP said.

"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 marketoriented. 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 government has banned individuals from depositing foreign exchange into bank accounts if the forex has been purchased from the open market. It was unclear till the filing of the report, however, whether the new rules issued by the government have significantly changed anything already contained in the State Bank's Foreign Exchange Manual (FEM).

Chapter 6 of the FEM issued by the State Bank, under which all private foreign currency accounts in the country are opened, lays out the conditions for all FE-25 foreign currency deposits. It states clearly that these accounts, once opened, cannot be fed by borrowed foreign currency, payments for exports or services rendered in or from Pakistan, proceeds of securities issued or sold to nonresidents, earnings from overseas operations of Pakistani firms and "any foreign exchange purchased from an authorized dealer in Pakistan for any purpose."

But on Friday, the government issued a set of new rules through an SRO under the Protection of Economic Reforms Act, 1992 reiterating these rules.

The rules say individual foreign currency accounts will not be credited with remittances received through sources like payment of goods exported from Pakistan; payment of services rendered in or from Pakistan; proceeds of securities issued or sold to nonresidents and loans from abroad. "A foreign currency account shall not be credited with any foreign exchange purchased from an authorised dealer, exchange company or money changer except as allowed by the State Bank through general or special permission under any law," said the government's notification.