All Authorised Dealers
in Foreign Exchange,

Dear Sirs,

INVESTMENT POLICY 1997

Government of Pakistan has formulated a new investment policy. Pursuant to the said policy, the following amendments in the Foreign Exchange Manual (7^th Edition 1992) are made with immediate effect:-

1. Para 3 Chapter XIX shall be substituted as under:-

"For the purpose of borrowing, foreign controlled companies are classified in the following four categories:-

1. Manufacturing companies including oil distribution companies.
2. Semi-manufacturing companies including construction companies.
3. Non-manufacturing companies involved in trade, and, services, social and agriculture Sectors as allowed under Government’s Investment Policy; and
4. Investment Banks."

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2. Para 4 Chapter XIX shall be substituted as under:-

"The State Bank has accorded general permission to the Authorized Dealers to grant rupee loans and credits to the foreign controlled companies in all the four categories to the extent of the following specified percentages of their paid-up capital, reserves, undistributed profits and un-remitted dividends in case of companies incorporated in Pakistan, and of Head Office permanent investment and un-remitted profits, in case of branches of foreign companies, as disclosed by their last audited annual balance sheet provided the loans and credits required by them are intended exclusively for meeting their working capital requirements and not for capital expenditure:

Category (I) No limit

Category (ii) 75%

Category (iii) 50%

Category (iv) 100%

For calculating the borrowing entitlement,the following pointswill be kept in view :

1. The word 'reserves' used above refers to general reserve or other free reserve of  the company available for declaration of dividend or issue of bonus shares.
2. Where unremitted profits and dividends are taken into consideration for determining   the borrowing entitlement,the entitlement will be reduced proportionately as and when the remittance of profit or dividends is effected.
3. If the company has any adjusted from its paid-up capital or head office investment, as the case may be, for the purpose of working out its borrowing entitlement.
4. Where a company having a negative net worth,raises its paid-up capital,its borrowing entitlement may be worked out with reference to the additional capital injected.This facility would be available for a period of three years from the date of increases in capital after which the normal rules shall apply.

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