1. Introduction.

This chapter sets out the regulations governing purchase and sale of foreign currencies by Authorised Dealers in the inter-bank market in Pakistan as well as their purchase from and sale to the State Bank and overseas branches and correspondents.

2. Accounts in Foreign Currencies.

3. Foreign Currency held at the disposal of the State Bank.

Foreign currency balances of Authorised Dealers, whether operated by their Head/Principal Offices or branch offices, shall at all times be held at the disposal of the State Bank who may give such directions for their disposal as it may consider necessary and expedient. The State Bank may direct Authorised Dealers at any time to sell either ready or for forward delivery, foreign currency or currencies held by them to the State Bank or to such other person or persons as the State Bank may direct.

4. Exchange Position.

5. Calculation of Exchange Position.

Exchange position on a particular day is the extent to which an Authorised Dealer has bought or sold foreign currencies on its own account without covering contracts with its constituents, the State Bank or other Authorised Dealers. Position can be calculated by adding to its currency holding the total of its contracted purchases and deducting therefrom the total of its contracted sales. If an Authorised Dealer has no currency holding but is overdrawn with its correspondents abroad, the position can be calculated by deducting its contracted purchases from the total of its overdrawn balance and its contracted sales. If its spot holding plus purchases exceed its sales or if its purchases exceed the combined total of its overdrawn balances plus its sales, it is an overbought position and vice versa. Open position should be worked out on the basis of opening balance and other transactions as per the books of the Authorised Dealer.

6. Over-bought or Over-sold Position in Excess of Prescribed Limit.

Authorised Dealers are required to report to the State Bank their positions in respect of all foreign currencies as per their books as at the close of business of each month. Returns should be sent by the 7th of the following month in the prescribed form (Appendix V—4). While currency-wise position as on the last working day of the month should be indicated in the statement, the daily figures to be given in the proforma on reverse of the statement would show the consolidated position in all currencies.

7. Balances in Foreign Currencies.

While Authorised Dealers are required to maintain their exchange position in each currency square or near square, they must also attempt to keep their ready balances to the minimum in line with their operational requirements avoiding heavy ready purchases against forward commitments. Covering forward sales to public by ready purchases is not permitted. On each day the balances in foreign currencies should not exceed the limits prescribed by the State Bank. Head Offices of Authorised Dealers will submit to the Senior Deputy Director (General), Exchange Control Department, State Bank of Pakistan, Central Directorate, Karachi a monthly statement of balances held abroad as per the local books as well as the books of Authorised Dealers' overseas branches / foreign correspondents in the prescribed form (Appendix V—5) by the 15th of the following month. While currency-wise position as on the last working day of the month would be indicated in the return as per the local books as well as the books of overseas branches/foreign correspondents, the daily figures to be given in the proforma on reverse of the return, would show the aggregate of the balances held abroad in all foreign currencies as per the local books of Authorised Dealers. If for any reasons beyond the control of Authorised Dealers, the balance as per their local books is in excess of the prescribed limit, Authorised Dealers must explain the reasons for such excess in a separate letter which should be attached to the return.

8. Purchase and Sale of Foreign Currencies.

Authorised Dealers may freely purchase foreign currencies as there are no restrictions on inward remittances. All sales of foreign currencies must, however, be in cover of genuine transactions approved by the State Bank or by the Authorised Dealers under powers delegated to them.

Authorised Dealers may freely buy and sell Foreign currencies from and to other Authorised Dealers in Pakistan provided such purchased / sales are backed by permissible transactions with their customers.

Above Paragraph Updated via F.E. Circular 8, dated 18th March, 1999.

Above Paragraph Updated via F.E. Circular 33, dated 28th March, 1994.

10. Purchase of U.S. Dollars from and their Sale to the State Bank.

Authorised Dealers may freely buy U.S. dollars from and sell them to the State Bank both ready and forward.