Circulars/Notifications - Exchange Policy Department  
 F.E. Circular No. 69
October 24, 1994 

All Authorized Dealers
In Foreign Exchange,

Dear Sirs,


In 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 Government’s Industrial Policy and the instructions issued by State Bank of Pakistan from time to time. Para-62, Chapter XIII ibid lay down the necessary procedural details for contracting and repayment of such loans/credits.

2. 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:-

  1. There shall be no ceiling on the amount of loan. The repayment period should not, however be less than five years.

  2. Interest 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.

  3. Exchange 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.

  4. No bank guarantee for securing such loans would be provided from Pakistan.

  5. The 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.

  6. (A) The inward remittances on account of loan disbursement from foreign lenders may be reported under Code 9821.


(B) Likewise the outward remittance on account of repayment of principal shall be reported on Form 'M' and Coded as 1821.

(C) Remittance of interest will be reported under Code. 1224.

3. 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 under Para 12 of Chapter XIX ibid would also continue.

Encl: As above.


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