UPDATED F.E. CIRCULAR

All Authorized Dealers in
Foreign Exchange

Dear Sirs,

DIRECT BORROWINGS IN PRIVATE SECTOR INCLUSIVE
OF SUPPLIERS’ CREDITS/GUARANTEED LOANS ABSORPTION OF
EXCHANGE RISK BY THE GOVERNMENT AGAINST PAYMENT OF FEE.

Attention of the Authorized Dealers is invited to F.E. Circular No.24 of 1989 in terms of which borrowers have been given an option to take the exchange risk coverage either from the date of opening of letter of credit or from the date of disbursement. In cases where the cover is taken from the date of disbursement, conversion of foreign currency amounts of the loan/interest for fixing the liability of the borrowers into Pakistan rupees is made at the Authorized Dealer’s T.T. & O.D. Spot Selling rate obtaining on the date of disbursement.

2. Instances have come to our notice where the borrowers obtain exchange risk coverage from the date of disbursement, retain the amounts in foreign currency accounts for the purpose of import of plant and machinery but don’t fully utilize the amount for the declared purpose and transfer a part of the funds from foreign currency accounts to Pakistan in cash. It is clarified that in such cases exchange risk coverage can be availed only from the date the exchange risk is taken by the borrower by converting the amount into rupees and for this purpose the Authorized Dealers’ Spot T.T. & O.D Selling rate obtaining on the date rupee encashment proceeds are paid to the borrowers by the Authorized Dealer will be applicable. In such cases, exchange risk coverage fee will also be payable from the date of conversion of foreign exchange into Pakistan rupees.

3. Please bring the above to the notice of your constituents.

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