FOREIGN CURRENCY ACCOUNTS
Opening of Foreign Currency Accounts with
Banks in Pakistan.
Different Schemes for Foreign Currency Accounts.
State Bank’s Forward Cover Scheme.
Acceptance of Deposits from foreign banks
operating abroad and overseas
Payment of subsidy on account of interest
F.E. 25 Scheme.
Special Foreign Currency Accounts of Private
Special permission for Foreign Currency Accounts.
General permission for Maintenance of Accounts
abroad by Resident Pakistanis.
Reporting of receipts into and payments from
foreign currency accounts.
Reporting of local disbursements from foreign
Reporting of interest on foreign currency
Surrender of Foreign Exchange.
Payments by Foreign Nationals in Foreign
Foreign Exchange received by Residents in
Dealers may, without prior approval of the State Bank, open with
them foreign currency accounts of the following: -
Nationals resident in or outside Pakistan, including those having
a dual nationality.
foreign nationals, whether residing abroad or in Pakistan.
Joint Account in the names of residents and non-residents.
diplomatic missions accredited to Pakistan, and their Diplomatic
International Organizations in Pakistan.
and companies established/incorporated and functioning in Pakistan,
including those having foreign share-holdings except as outlined
in sub-para (v) below.
Trusts, Foundations etc. which are exempted from income tax.
of foreign firms and companies in Pakistan.
Exchange Companies even if owned by a bank or financial institution.
foreign firms/corporations, other than banks and financial institutions
owned by Banks, incorporated and operating abroad provided these
are owned by persons who are otherwise eligible to open foreign
the facility is not available to airlines and shipping companies
operating in/through Pakistan or collecting passage and freight
in Pakistan and the investment banks, leasing companies and modaraba
companies including those which have been granted licences to
deal in foreign exchange.
Opening of foreign currency account covered by sub-para (i) is
subject to the condition that these are not fed with:
foreign exchange borrowed under any general or specific permission
given by the State Bank, unless otherwise permitted;
payment for goods exported from Pakistan;
proceeds of securities issued or sold to non-residents;
payment received for services rendered in or from Pakistan;
or profits of the overseas offices or branches of Pakistani firms
and companies including banks, investment of resident Pakistanis
foreign exchange purchased from an Authorised Dealer in Pakistan
for any purpose.
Corporate Bodies/Legal entities cannot generate funds from the
Kerb market for deposit in their foreign currency accounts.
Foreign currency accounts can be fed by remittances received from
abroad, travellers cheques issued outside Pakistan (whether in
the name of account holder or in the name of any other person),
foreign currency notes and foreign exchange generated by encashment
of securities issued by the Government of Pakistan.
Opening by firms/companies of foreign currency accounts, which
are to be fed through the funds of foreign equity/foreign currency
loans raised for establishment of industrial and other projects
and by contractors who receive payments in foreign exchange from
the employers, would be as per procedure laid down in paragraph
8 of this chapter.
These accounts are free from all Foreign Exchange restrictions.
In other words, account holders have full freedom to operate on
their accounts to the extent of the balance available in the accounts
either for local payments in Rupees or for remittance to any country
and for any purpose or for withdrawals in the shape of foreign
currency notes and travellers cheques. However, a restriction
was placed on withdrawal in foreign currency from some categories
of foreign currency accounts existing as on 28th May,
1998. The instructions
issued vide FE Circular No.12 of 1998, as amended from time to
time, would continue to be operative, till the restrictions are
lifted. Holders of such accounts are, however, free to transfer
their accounts from one Authorised Dealer to another.
Accounts can be maintained and payments (excluding local payments)
made in any currency of choice of the account holder. Credit Card
facility can be obtained by the account holders to the extent
of the balances held in their respective accounts, for utilization
in and outside Pakistan provided settlement of the bills in respect
of expenditure within the country is made in Rupees only and the
relevant foreign currency amount is taken by the Authorised Dealers
in their daily exchange position.
Authorised Dealers can mark lien on the foreign currency accounts
in respect of banking facilities like credit cards, bank guarantees
and loan/credit etc. availed of by the account holders in and
outside Pakistan. The aggregate amount of the facilities availed
of in and outside Pakistan should not, however, exceed the balance
in the respective accounts at any point of time and the regulations
on credit should be strictly adhered to.
Head/Principal Offices of Authorised Dealers will send to the
State Bank of Pakistan, Central Directorate, Karachi such returns
in respect of these foreign currency accounts as may be prescribed
from time to time.
2. Different Schemes for Foreign Currency
currency accounts covered by paragraph (1) could be opened by
the Authorised Dealers upto 28th May, 1998 under the
State Bank’s forward cover scheme, and thereafter under the rules
introduced vide FE Circular No.25 of June 20, 1998. Separate ledgers
will be maintained by the Authorised Dealers for these foreign
currency accounts. In addition, Special Foreign Currency Accounts
can be opened with the specific or general permission of the State
3. State Bank’s Forward Cover Scheme.
Under the State Bank’s forward cover scheme, the Authorised Dealers
will fix their own rates of interest for Term Deposits of 3 months,
6 months, 12 months, 2 years and 3 years provided they do not
exceed the average Bid rates provided by British Banker’s Association
(BBA) for the concerned currencies at the close of business on
the previous working day plus the margins prescribed by the State
Bank from time to time. The maximum rates for payment of interest,
including the margins allowed by the State Bank, are published
daily by the Foreign Exchange Rates Committee.
As regards foreign currency deposits of less than 3 months including
Call Deposits, Savings Bank, Special Notice etc. accounts, Authorised
Dealers shall pay interest on the basis of return last allowed
on similar Rupee PLS Accounts provided the rate at which interest
is paid does not exceed the interest rate applicable to 3 months
Term Deposits of the relevant foreign currency.
Authorised Dealers shall sell all the deposits in foreign currency
accounts to the State Bank in multiples of US$ 1,000/-, £ Stg.1,000/-,
Euro 1,000/- and J. Yen 250,000/-. State Bank shall cover exchange
risk of all such deposits as well as interest accruing thereon
at the option of the Authorised Dealers, subject to payment of
fee at the time of taking the forward cover at the rate(s) prescribed
by the State Bank from time to time. Fee is payable on the full
amount of forward cover obtained notwithstanding whether it is
in respect of the amounts of deposit or for both the amount of
deposit and interest. In case of premature withdrawal of deposit,
fee for the unexpired period is refundable.
4. Acceptance of
Deposits from foreign banks operating abroad and overseas branches.
an exception to the rules set out in paragraph 1(i) to (j) of
this chapter, Authorised Dealers can accept foreign currency deposits
from their overseas branches and foreign banks operating abroad,
including financial institutions owned by them, provided the amount
and period of maturity of such deposits is not less than those
prescribed from time to time. Interest on these foreign currency
deposits can be paid by the Authorised Dealers annually, six monthly
or quarterly in accordance with the option exercised by the depositor
in writing at the time of placement of deposits. Interest can
be paid at the rate not exceeding the prescribed margins over
Bid rate for the respective period as provided by the BBA at the
close of business on the working day immediately preceding the
date of deposit as published by the Foreign Exchange Rates Committee.
5. Payment of subsidy on account of
the interest paid on foreign currency Term Deposits of 3, 6 and
12 months on the basis of
BBA's bid rates as prescribed in
the earlier paragraphs exceeds the return last allowed
on similar Rupee PLS Accounts, State Bank shall reimburse the
amount of differential on account of the excess to the Authorised
Dealers. For the purpose of claiming reimbursement of the differential,
Authorised Dealers should furnish to the Chief Managers' Offices
of the State Bank, details of individual foreign currency Term
Deposits in the prescribed form (Appendix V-3) while surrendering
the amount of foreign exchange to the State Bank. This statement
will be submitted in triplicate and bear running serial number.
After the interest has been paid, claim for payment of interest
differential will be lodged by the Authorised Dealers with the
Chief Managers' Offices of the State Bank in the form given at
6. F.E. 25 Scheme.
The amounts of foreign currency deposits accepted outside State
Bank’s forward cover scheme i.e. under F.E. Circular No. 25 of
1998, are not required to be surrendered to the State Bank and
the Bank will not provide any forward cover for the same. The
Authorised Dealers accepting such deposits are free to lend, invest
and place on deposit such funds in Pakistan and abroad subject
to the observance of regulations prescribed under the Banking
Authorised Dealers are free to decide the rate of return offered
on such deposits, provided the maximum rate of return does not
exceed LIBOR applicable on the date of determination of such return/profit.
Special Foreign Currency Accounts of Private Power Projects.
Authorised Dealers may open the following Special Foreign Currency
Accounts/Off-shore Foreign Currency Accounts of private power
projects in Pakistan as per the Implementation Agreements (IAs)
entered into with Private Power and Infrastructure Board (PPIB),
Government of Pakistan. These accounts will be maintained during
the construction and operation of the projects for the following
purposes subject to the conditions mentioned against each and
the balances held in such accounts will be retained by the Authorised
Dealers in addition to their Exposure Limits and will also not
be required to be reported under F.E. 25 Scheme:
Special Foreign Currency Account in or outside Pakistan.
will be maintained for deposit of foreign equity and foreign currency
loan under the Loan Agreement registered with the State Bank.
The amounts available therein will be utilized for the purposes
of the project as provided for in the IAs.
Special Foreign Currency Insurance Account.
will be maintained for depositing amounts required for payment
of insurance/reinsurance premia and for receiving insurance/reinsurance
claims against covers taken in foreign currency outside Pakistan
with the approval of the Controller of Insurance or with State
Bank’s approval from an insurer in Pakistan, provided that amounts
not required for meeting expenditure in foreign exchange will
be repatriated to Pakistan and converted into rupees.
Off-Shore Foreign Currency Control Account.
will be maintained subject to the condition that PPIB/Independent
Engineer would determine for each project the portion of revenues
required to meet the foreign currency cost for operating the project.
Off-Shore Foreign Currency Operating Account.
will be maintained subject to the condition that O&M expenses
to be remitted/deposited periodically to this account will be
apportioned by the PPIB/Independent Engineer.
Off-Shore Disputed Payment Escrow Account.
will be maintained subject to the condition that the balance will
be remitted to Pakistan once the dispute is over.
Foreign Currency Debt Payment Account.
will be maintained for depositing the amount required for Debt
Off-Shore Debt Service Reserve Account.
will be maintained subject to the condition that this account
will be liquidated simultaneously with the retirement of debt
and the maximum balance in this account would not exceed the next
12 months Debt Service Payment (both Principal and Interest).
Off-Shore Foreign Currency Maintenance Reserve Account.
will be opened and maintained subject to the condition that this
amount will be liquidated simultaneously with the life of the
agreement and that this account will hold the maximum of US$ 3
million during the term of Power Purchase Agreement.
Off-Shore Foreign Currency Dividend Account.
will be used for receiving remittance of dividends as and when
declared and paid by the company.
A monthly statement in the form prescribed at Appendix V-5 will
be submitted for each account separately alongwith a certificate
from the company’s auditors to the effect that the payments made
from the accounts are strictly in accordance with or covered under
the IA, Power Purchase Agreement or other agreements, if any,
approved by the Government.
Interest earned on balances held in these accounts will be repatriated
There will be nil balance in the Main Control Account and all
other accounts after the expiry of the relevant Agreement Period.
Any earnings from dealing in currency/exchange should also be
repatriated to Pakistan.
Authorised Dealers will ensure that Income Tax, wherever due on
payments made through the accounts, is duly deducted and paid
to the Income Tax Authorities.
Authorised Dealers may also open Special Foreign Currency Accounts
of the foreign EPC (Engineering, Procurement and Construction)
and O&M (Operation and Maintenance) contractors of the Power
Projects operating in Pakistan with the approval of the Government
for receipt of foreign currency amounts under the contracts awarded
to them by the Power Projects and its utilization in accordance
with the EPC/O&M contracts.
Special permission for Foreign Currency Accounts.
Foreign Oil/Mineral exploration companies and foreign contractors
and their foreign sub-contractors may be allowed by the Authorised
Dealers to open foreign currency accounts under the Scheme described
in paragraph 6 or Special Foreign Currency Accounts subject to
the condition that they will meet all their expenditure in Pakistan
including salaries of foreign nationals/non-residents in Pak Rupees
only, out of rupee payments, if any, received by them in terms
of their contracts/by converting in the inter-bank market funds
received from their Head Offices/by converting funds from their
foreign currency accounts in the inter-bank market.
(a) Firms and companies raising foreign equity and foreign currency
loan may be allowed by Authorised Dealers to open special foreign
currency account for receiving and retaining the foreign funds
on submission of information about the source of foreign funding
and the amount required to be retained in foreign currency.
The funds available in such foreign currency accounts can
be used by the account holders for making only those types of
payments which are otherwise permissible in terms of the instructions
laid down in this Manual (e.g. imports, consultancy) and which
are related to the business of the account holder. Any amount
not so used will be required to be converted into rupees in the
inter-bank market and no withdrawal will be allowed in the shape
of foreign currency notes.
The concerned Authorised Dealer will be required to submit monthly
statements in the prescribed proforma (Appendix V-5) alongwith
the related import documents, invoices, agreements etc.
9. General permission for Maintenance
of Accounts abroad by Resident Pakistanis.
nationals resident in Pakistan are not permitted to open or maintain
any foreign currency accounts with banks etc., outside Pakistan.
As an exception, they can maintain foreign currency accounts abroad
in any country other than Afghanistan, Bangladesh, India and Israel
provided the balances held in such accounts do not exceed U.S.$
1000/- or equivalent thereof in other currencies as provided in
Government Notification No. SRO 1016(1) 79 dated the 17th October,
1979. These accounts cannot, however, be operated from Pakistan
without the prior approval of the State Bank.
10. Reporting of
receipts into and payments from foreign currency accounts.
of foreign currency amounts for credit to the foreign currency
accounts under the Forward Cover Scheme should be reported by
the Authorised Dealers as "Purchase" on Schedule 'J'
under Code 9718 in the case of accounts opened in terms of paragraph
1 and under Code 9828 in respect of accounts opened under special
permission granted by the State Bank in accordance with the provisions
of paragraphs 7 & 8 ibid. Similarly payments out of the foreign
currency accounts should be reported by the Authorised Dealers
as "Sale" on Schedule E-4 under Code 1718 in the former
case and under Code 1828 in the later case. Transactions in accounts
covered by paragraph 6 are not required to be reported in the
11. Reporting of
local disbursements from foreign currency account.
Dealers should report the payments in rupees from foreign currency
accounts as "Sale" on Schedule E-4 under Code 1718 or
1828, as the case may be. The Rupee receipts should simultaneously
be reported as "Purchase" on relevant schedules under
a code appropriate to the purpose of the receipt.
12. Reporting of
interest on foreign currency accounts.
paid by Authorised Dealers on Foreign Currency Accounts should
be reported as "Sale" on Schedule E - 4 of the monthly
foreign exchange returns under Code 1226.
Surrender of Foreign Exchange.
In exercise of the powers conferred by Section 9 of the
Act, the Government have issued Notification No. SRO 1016(1) 79
dated the 17th October, 1979 (Appendix II-8) requiring all citizens
of Pakistan and other persons residing in Pakistan continuously
for six months or more, who become the owner of any foreign exchange
whether held in Pakistan or abroad, to sell such foreign exchange
to an Authorised Dealer within three months of the date of acquisition
by them of such foreign exchange. The provisions of the aforesaid
notification do not apply to the following cases viz:
Foreign exchange held abroad by foreign diplomats and foreign
nationals employed in Embassies and Missions of foreign countries
Foreign exchange held abroad by foreign nationals or foreign business
houses, except to the extent that it represents their earnings
abroad in respect of business conducted in Pakistan or services
rendered while in Pakistan.
Foreign exchange held by residents in Pakistan in countries other
than Afghanistan, Bangladesh, India and Israel provided the amount
does not exceed in the aggregate U.S. $1000/- or equivalent thereof
in other currencies.
Afghan currency whether held in or outside Pakistan.
the purposes of the aforesaid notification the term "residents
in Pakistan" excludes citizens of Pakistan in foreign countries
so long as they stay outside Pakistan, but includes foreign nationals
who reside continuously in Pakistan for six months or more.
Payments by Foreign Nationals in Foreign Currencies.
in foreign currency by foreign nationals residing in Pakistan
to or on behalf of residents of Pakistan whether Pakistanis or
foreign nationals are prohibited. Foreign nationals should not,
therefore, directly or indirectly, make foreign currency available
to the residents or to other persons on their behalf against payment
in Rupees. Such payments are prohibited even from their foreign
currency accounts which they are permitted to maintain and operate
Foreign Exchange received by Residents in Pakistan.
in foreign exchange received by an Authorised Dealer on behalf
of a resident in Pakistan must not be retained in foreign exchange
but must be converted into Rupees unless the State Bank has given
general or special permission to the beneficiary to retain the
foreign exchange received by him.