Pakistanis legally sending $2 billion abroad yearly

Review of laws may create panic, says committee chairman

ISLAMABAD: The State Bank of Pakistan on Wednesday said that the legal transfer of dollars abroad through normal banking channels has reached around $2 billion per annum.

From 2013 through 2015, Pakistanis have sent $5.7 billion abroad through their foreign currency accounts, said SBP Executive Director Irfan Ali while giving a testimony to the National Assembly Standing Committee on Finance.



He told the committee that the Protection of Economic Reforms Act (PERA) of 1992 prescribes no limit on funds transfer through foreign currency accounts to and from Pakistan on an individual. According to him, money can even be transferred without the permission of the central bank.

The central bank officials had been called to give a briefing about investment made by Pakistanis abroad during the last three years. However, the $5.7 billion transfers were not on account of investment.

The SBP and the federal government had allowed $601 million investment abroad during the last three years, said Ali. The $601 million investment abroad was over and above the transfer of $5.7 billion.

Ali said under the PERA, anyone with a foreign currency account could transfer money abroad via normal banking channels without the approval of the central bank. The figure confirms recent reports by the Dubai Land Department that showed that Pakistanis have invested AED 24 billion or $6.6 billion in the Dubai property market since 2013.



During 2010-2011, $1 billion was sent abroad through foreign currency accounts (FCAs), which increased to $1.2 billion during 2011-12. During 2012-13, the figure jumped to $1.9 billion, and recorded at $2 billion by the end of 2015. The SBP did not provide data for 2015-16.

The review of laws that allow accountholders to remit dollars abroad may create panic among them, said committee chairman Qaiser Sheikh. PTI’s Asad Umar proposed to set up a subcommittee to review these laws, but he, too, withdrew his recommendation after other members of the committee did not agree with him.

The PERA allowed complete secrecy to the holder of a foreign currency account. “Holders of foreign currency accounts enjoy great luxury, as they cannot be deprived of conducting such transactions,” SBP (Director) Exchange Companies Fazal Munir, cited Section 4 of the act in his defence.

Gen (retd) Pervez Musharraf had promulgated the Foreign Currency Accounts (Protection) Ordinance, 2001, ensuring complete protection to foreign currency account holders. Tax officials argue that their hands are tied under the PERA and the 2001 ordinance.

The SBP officials said the FCAs are not exempted from income tax and the Federal Board of Revenue can question about the taxes paid on the money deposited in these accounts.

Published in The Express Tribune, August 25^th, 2016.