In Foreign Exchange,
terms of Para
61 (ii), Chapter
XIII of the Foreign Exchange Manual (7th
Edition, 1992), Private Sector entrepreneurs have been given
general permission to obtain foreign currency loans from
banks/financial institutions and Suppliers Credits including
credits under PAYE Scheme, not involving Government guarantee,
for financing foreign currency cost of industrial projects
covered by the Governments Industrial Policy and the
instructions issued by State Bank of Pakistan from time
to time. Para-62,
XIII ibid lay down the necessary procedural details
for contracting and repayment of such loans/credits.
While the facility mentioned in the preceding paragraph
will continue, it has since been decided to permit individuals/firms/companies
resident in Pakistan including foreign controlled companies
and branches of foreign companies operating in Pakistan
but excluding banks to obtain loans from abroad in foreign
currencies on reportable basis for any purpose on the following
terms and conditions:-
shall be no ceiling on the amount of loan. The repayment
period should not, however be less than five years.
will be payable in arrears on half-yearly/yearly basis
at a rate not exceeding the relevant LIBOR + 1.5% and
will be subject to deduction of Pakistan taxes as may
be livable under the law. The borrowers shall be free
to pay interest according to the above formula at a
fixed or floating rate.
rate fluctuation risk will be borne by the borrowers
and no forward cover/exchange risk coverage would be
provided by State Bank/Authorized Dealers in Pakistan.
bank guarantee for securing such loans would be provided
borrower will get the agreement with foreign lenders
registered with an Authorized Dealer who will handle
all transactions thereunder and intimate the details
after completion of the disbursements, to the Investment
Division, Foreign Exchange Department, State Bank of
Pakistan, Central Directorate, Karachi in the enclosed
proforma (Annexure 'R')
in triplicate alongwith showing encashment of the loan
amount into Pak Rupees. Thereafter the Authorized Dealers
would be free to remit the installment (s) of principal
and interest, as the case may be, on due dates strictly
in accordance with the terms of repayment intimated
to the State Bank. Prepayments would not be permissible.
Remittance of interest will be effected after deduction
of tax, if livable thereon.
The inward remittances on account of loan disbursement
from foreign lenders may be reported under Code 9821.
Likewise the outward remittance on account of repayment
of principal shall be reported on Form
'M' and Coded as 1821.
Remittance of interest will be reported under Code. 1224.
The facility given vide Para 2 of
this F.E. Circular will not affect the entitlement of foreign
controlled companies for local borrowings as per Chapter
XIX of the Foreign Exchange Manual (7th Edition,
1992) as amended from time to time. The facilities available
12 of Chapter
XIX ibid would also continue.