Govt opposes ‘regime changes’ for foreign currency accounts

Says any change may lead to the withdrawal of deposits that currently stand at $7b

ISLAMABAD: The federal government again opposed a private-member bill that seeks the withdrawal of unprecedented immunities enjoyed by foreign currency accounts holders, fearing any such change may lead to the withdrawal of deposits that currently stand at $7 billion.

The government gave its policy statement in a meeting of the Senate Standing Committee on Finance. The parliamentary body also recommended Finance Minister Ishaq Dar to step down in the best interest of the country, as corruption charges against him were tarnishing the image of Pakistan.

The State Bank of Pakistan (SBP) and the Ministry of Finance is of considered view that at this point in time there is no need to change the foreign currency regime, said Noor Ahmad, Additional Secretary External Finance. Ahmad gave the policy statement in the meeting of Senate Standing Committee on Finance that took up the Bill to further amend the Protection of Economic Reforms Act of 1992.



“Roughly $7 billion are currently deposited in foreign currency accounts and this is our main concern,” said Irfan Ali, executive director of the central bank.

Senator Saleem Mandviwalla, chairman of the Senate Standing Committee on Finance, had moved the Bill last year after the federal government backtracked from its announcement to review all the existing laws that allowed people to transfer money abroad and evade taxes.

Mandviwalla moved the bill months after Panamagate. Dar had promised to fill the lacunas that allowed people to invest money abroad in offshore companies. This never happened.

Mandviwalla’s proposed amendments look to take care of genuine foreign currency account holders and are seeking to cut the benefits for those who are transferring billions of dollars abroad without any check. He has suggested that except for commercial transaction purposes, all other individuals and entities should not hold foreign currency accounts, as these have become the main source of transferring money abroad and evading taxes.

According to data provided by the central bank in August last year, from 2013 through 2015, Pakistanis sent $5.7 billion abroad through foreign currency accounts.

Ahmad said that most of the proposed amendments were not consistent with the existing foreign currency regime and did not suit the government. He also said that there were also legal issues in amending the fiscal and monetary laws through a private-member bill.

However, Mandviwalla said that he was ready to accommodate the government’s proposals on the subject in order to resolve the issue. Secretary Finance Shahid Mehmood sought more time from the committee to consult with the Governor of the SBP to respond to Mandviwalla’s proposal. The PML-N government had enacted the PERA in 1992 that, according to legal and tax experts, was the root cause behind most fiscal crimes committed today. Senator Mandviwalla said that the FBR cannot take any action against foreign currency accountholders.

Mandviwalla also showed annoyance over half-baked responses given by the SBP officials. He said that the SBP’s objections were superfluous.

As of end August, there were $6.978 billion deposits in foreign currency accounts, according to SBP data.

The federal government is sensitive to any movement in foreign currency accounts due to fast depleting official foreign currency reserves. As of September 15, official foreign currency reserves further dipped to $14.283 billion - down by $474 million in a single week, reported the central bank on Thursday.



Dar’s resignation

The Senate Standing Committee asked Dar to resign as Finance Minister in the “best interest of the country”. Pakistan Tehreek-e-Insaf’s Senator Mohsin Aziz gave the proposal, which was also backed by PPP senators.

The finance ministry is very important for the country and people abroad have now started asking about the fate of its minister, said Mandviwalla.

Published in The Express Tribune, September 22^nd, 2017.

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