Annual Performance Review: SBP takes several initiatives to improve forex regime

The State Bank of Pakistan (SBP) has taken several initiatives to improve effectiveness of foreign exchange regime during FY17. According to SBP's Annual Performance Review, in order to improve effectiveness of foreign exchange regime, besides amendment to laws, several trading sessions were conducted and an Electronic Import Form was launched. In addition, registration of contracts with Afghanistan and reporting of Exchange Companies were also initiated.
During FY17, the Parliament passed the amendments to Foreign Exchange Regulation Act (FERA), 1947 proposed by the SBP empowering the central bank to impose monetary penalties on its regulates for violation of foreign exchange rules/regulations. It will enable SBP to more effectively administer the foreign exchange business of authorized dealers and exchange companies in Pakistan.
In addition, capacity building of authorized dealers, exchange companies and law enforcement agencies in collaboration with Institute of Bankers Pakistan and National Institute of Banking and Finance is being done on continuous basis and so far around 1500 officials have been given training in foreign exchange rules and regulations at different locations across the country.
According to SBP, In order to facilitate stakeholders and to strengthen monitoring of import payments from Pakistan, SBP and Pakistan Customs also developed Electronic Import Form (EIF) module in Pakistan Customs' Web Based system WeBOC. The project has successfully been implemented and is operational since September, 2016.
During the last fiscal year, the permissible offshore accounts of resident entities were brought under SBP regulatory ambit. The registration/acknowledgment procedures of capital account transactions of private sector were simplified along with segregation of China Pakistan Economic Corridor (CPEC) projects in order to establish a database of foreign exchange obligations. These instructions will also enable SBP in effective assessment of foreign exchange implications of CPEC.
In order to promote the culture of documentation, the regulatory due diligence of export of securities (Issue/Transfer) to non-resident investors against their investment into Pakistan (FDI-Inward) was enhanced. The instructions will also facilitate real investors and discourage money launderers to channellize their funds as foreign investment in Pakistan, the SBP informed.
Similarly, in view of peculiar nature of trade with Afghanistan through land routes, especially through Torkham and Chaman borders, banks have been allowed to register contracts of the Pakistani importers and make payments there against, as and when required, through a more liberalized mechanism in terms of which routing of transport documents has been allowed directly from exporter to importer, without involving exporter's or importer's bank.
During the last fiscal year, SBP further streamlined foreign portfolio investment through banking channel, whereby non-resident portfolio investors were allowed to use their funds in Special Convertible Rupee Account to meet margin requirements of ready/cash market transactions in Pakistan Stock Exchange. The foreign investors have also been permitted to pledge their unencumbered securities in favor of National Clearing Company of Pakistan to meet such margins till settlement of respective transactions.
Exchange Companies are required to submit various reports/returns to SBP according to their scope of business. In order to facilitate Exchange Companies and enhance integrity of reporting of data, an integrated reporting system has been implemented to enable Exchange Companies to submit comprehensive data to SBP through web based online system.