<\/p>\n
The State Bank of Pakistan (SBP) on Wednesday announced its decision to introduce structural reforms in the exchange companies\u2019 (ECs) sector in order to provide \u201cbetter services to the general public and bring transparency and competitiveness\u201d in the sector.<\/p>\n
\u201cThis is expected to strengthen governance, internal controls, and compliance culture in the sector,\u201d the central bank\u2019s statement said, adding that banks engaged in foreign exchange operations were required to set up separate entities for these transactions.<\/p>\n
The announcement comes after Chief of Army Staff (COAS) General Asim Munir assured<\/a> the business community on Sunday of fostering transparency in dollar exchange and interbank rates.<\/p>\n \u201cThe money exchanges would be brought under the purview of taxation, fostering transparency in dollar exchange and interbank rates,\u201d the COAS said while talking to the business community at a meeting held at the Lahore Corps headquarters.<\/p>\n Meanwhile, reports<\/a> have also surfaced of authorities planning a clampdown on hard currency hoarders and smugglers.<\/p>\n The SBP\u2019s measure also seems to be a step towards fulfilling the International Monetary Fund\u2019s (IMF) condition of shrinking the gap between the rupee\u2019s interbank and open market rate.<\/p>\n Under a $3 billion loan programme agreed in July to avert a default on Pakistan\u2019s sovereign debt, the IMF told authorities to limit the premium between the local rupee\u2019s interbank and open market rates to 1.25 per cent over any given five business days.<\/p>\n The currency has fallen sharply this year, including a 5pc decline to record lows since August 15, when a caretaker government took office.<\/p>\n Experts and stakeholders have blamed<\/a> the powerful grip of the grey market and the IMF\u2019s \u201csignificant interference\u201d in the country\u2019s banking and currency sectors for the rupee\u2019s freefall.<\/p>\n The SBP said in its statement today that under the revised regulations, leading banks actively engaged in foreign exchange business would have to establish \u201cwholly owned exchange companies to cater to the legitimate foreign exchange needs of the general public\u201d.<\/p>\n Furthermore, various types of existing exchange companies and their franchisees would have to be \u201cconsolidated and transformed into a single category of exchange companies with a well-defined mandate\u201d, the statement said.<\/p>\n In addition, the minimum capital requirement for exchange companies was being increased from Rs200 million to Rs500m, it added.<\/p>\n The SBP also outlined a transition process for exchange companies, their franchises, and category B exchange companies (ECs-B) to become mainstream ECs.<\/p>\n It said \u201cECs-B may graduate to exchange companies after meeting all regulatory requirements, within three months; otherwise, their license would be cancelled.\u201d<\/p>\n \u201cFranchisees of exchange companies may either merge or sell operations to the concerned franchiser company, within three months after meeting all regulatory requirements.<\/p>\n \u201cFor the above purpose, the ECs-B and franchises of exchange companies will submit their conversion plan and seek an NOC (no-objection certificate) from the SBP within one month,\u201d the statement said.<\/p>\n After the plan was announced, Deputy Executive Director (res) at Sustainable Development Policy Institute Sajid Amin Javed pointed out the need for more clarity.<\/p>\n \u201cThe SBP has licensed banks to open foreign exchange companies. Countries do. But, let\u2019s see how the SBP defines \u2018legitimate foreign exchange needs\u2019 and \u2018well-defined mandate\u2019 of companies.<\/p>\n \u201cIt will indicate the purpose and impact of reform. Clear, written definition is needed,\u201d he wrote on X, formerly Twitter.<\/p>\n On the other hand, former chairman of the Federal Board of Revenue (FBR) Shabbar Zaidi termed the regularisation of exchange companies an \u201cexcellent step\u201d.<\/p>\n \u201cThis animal has to be merged with banks. It\u2019s better late than never,\u201d he wrote on X, adding that the government should now take steps to end He said the movement of dollars should only be allowed for \u201ctravel on passports or bank account\u201d and anybody carrying the foreign currency otherwise should be jailed.<\/p>\n Separately, General Secretary of the Exchange Companies Association of Pakistan (ECAP) Zafar Paracha told Dawn.com<\/em> that he had sent a request to the central bank\u2019s foreign exchange director, highlighting the arrival of a policeman at his exchange company\u2019s branch in Gujranwala \u201cwithout any authority letter\u201d.<\/p>\n \u201cIt is to bring to notice that a policeman came to the branches of exchange companies, Gujranwala and said that under the instructions of Mr Hashim Gujar, SP Gujranwala Special Branch, I have to sit in the branch and check the dollar sale and customers during the whole day,\u201d the text of the request that Paracha shared with Dawn.com<\/em> read.<\/p>\n Additional input from Reuters<\/em><\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":" The State Bank of Pakistan (SBP) on Wednesday announced its decision to introduce structural reforms in the exchange companies\u2019 (ECs) sector in order to provide \u201cbetter services to the general public and bring transparency and competitiveness\u201d in the sector. \u201cThis is expected to strengthen governance, internal controls, and compliance culture in the sector,\u201d the central 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plan<\/h2>\n
Analysts\u2019 views<\/h2>\n
\nthe physical movement of dollars.<\/p>\nZafar Paracha\u2019s letter<\/h2>\n