Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

PAKISTAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of March 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: July 1, 1994.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with Pakistan states that as of November 1, 2006, Pakistan maintained an exchange restriction on payments for current international transactions subject to Fund approval under Article VIII, Section 2a, resulting from limitations on advance payments for certain imports. (Country Report No. 06/426)
International security restrictionsNo.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); foreign exchange (FE) circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Exchange Arrangement
CurrencyThe currency of Pakistan is the Pakistan rupee.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementAll current international transactions are conducted in the interbank foreign exchange market. Importers, exporters, and businesses are free to shop around for the best possible rates in the interbank market for all exchange transactions without recourse to the central bank. Banks may purchase foreign exchange from exchange companies (ECs) at freely negotiated rates. Some government foreign exchange transactions (e.g., debt-service payments, conversion of privatization proceeds) are conducted directly by the State Bank of Pakistan (SBP), at the rates determined in the interbank market. Individuals may purchase foreign exchange through the interbank or EC foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThe maximum term of forward cover provided by banks for trade transactions is 12 months, although this may be rolled over; these facilities are also provided for funds transferred from abroad for portfolio investment. Forward cover against exports on a contract basis is permitted. ADs may also extend forward cover for imports (only against LCs), exports, and foreign private loans.
Official cover of forward operationsThe SBP provides forward cover only for frozen foreign currency accounts (FCAs) and the National Debt Retirement Program, subject to an annual fee of 4% on onshore dollar deposits. No forward cover is offered on new foreign currency deposits.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements of current and capital account transactions with other countries are allowed in fully convertible currencies as chosen by the contracting parties.
Controls on the use of domestic currency
For current transactions and paymentsn.a.
For capital transactions
Transactions in capital and money market instrumentsNonresidents may acquire such instruments through conversion in rupees of remittances from abroad and repatriation of principal or gains without reference to the CB.
Transactions in derivatives and other instrumentsYes.
Credit operationsYes.
Use of foreign exchange among residentsAll obligations among residents are settled in rupees. Local FCA holders may freely transfer funds to other FCA holders, and the Local U.S. Dollar Instruments Collection and Settlement System exists for such settlements.
Payments arrangements
Regional arrangementsPakistan is a member of the ACU.
Clearing agreementsPayments to, and receipts from, member countries of the ACU for current transactions are effected in AMUs, at the rate of AMU 1 per $1. Accounts are settled every two months.
Administration of controlThe SBP has delegated authority to banks and a number of other financial institutions to deal in all foreign currencies and to sell or purchase foreign exchange within limits prescribed by the SBP for different transactions. Banks are allowed to provide foreign exchange in excess of the prescribed limit for bona fide requirements. In addition, the SBP issues licenses to ECs for the sale and purchase of foreign currency in cash and for other business remittances. The SBP also issues licenses to Category “B” ECs under the prescribed criteria. Category “B” companies are authorized to deal only in the purchase or sale of foreign currency notes and coins.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeLocal trade in gold bullion is unrestricted.
On external tradeNo restrictions apply to exports. Imports exempt from normal import tariffs may be effected by exporters of gold jewelry registered with the Board of Investment.
Controls on exports and imports of banknotes
On exports
Domestic currencyAn individual may take out up to PRs 500 to India and PRs 3,000 to other countries.
Foreign currencyThere are no restrictions on the exports of foreign currency through banks and exchange companies. Individuals may take out up to $10,000 or its equivalent without permission. Exports exceeding $10,000 or PRs 3,000 to the Islamic Republic of Afghanistan may be effected by international organizations, subject to certain conditions.
On imports
Domestic currencyAn individual may bring in up to PRs 500 from India and PRs 3,000 from other countries.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Resident Accounts
Foreign exchange accounts permittedBanks and nonbank financial institutions are allowed to offer a new FCA scheme. Holders of frozen (old) FCAs are permitted to purchase special dollar bonds of the government of Pakistan against the outstanding balances in their FCAs or to convert the foreign currency into rupees at the prevailing exchange rate.
Held domesticallyThese accounts may be credited with remittances from abroad, traveler’s checks, and foreign currency notes. However, receipts from exports of goods and services, earnings from services of residents, earnings and profits of overseas offices or branches of Pakistan firms or companies and banks, and foreign exchange released from Pakistan for any specified purpose may not be credited to these accounts. FCAs maintained by resident corporate bodies or legal entities may not be credited with foreign currency purchased in the exchange market. These accounts may be permanently retained. Under the new FCA scheme, institutions are free to keep or invest their deposits abroad or in Pakistan. To lend these deposit funds to borrowers in Pakistan for trade-related activities, ADs are required to observe prudential regulations of the SBP. ADs are free to decide the rate of return that they offer to depositors. There are no restrictions on operations of or remittances from FCAs.
Held abroadBalances of up to the equivalent of $1,000 may be held abroad by residents in any country (except the Islamic Republic of Afghanistan, Bangladesh, India, and Israel) in FCAs, which may not be used for operations from Pakistan without the approval of the SBP.
Approval requiredYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Nonresident Accounts
Foreign exchange accounts permittedThe following may open FCAs and transact freely with banks in Pakistan without prior approval of the SBP: Pakistan nationals residing abroad; foreign nationals, whether residing abroad or in Pakistan; charitable organizations; firms and companies owned by persons who are otherwise eligible; and diplomatic missions and the staffs of international organizations. ADs are free to decide the rate of return they offer to depositors. Deposit holders wishing to make payments in Pakistan in rupees must first convert the foreign exchange drawn from their accounts into rupees. If Pakistan nationals holding such accounts return to Pakistan, they may retain the accounts permanently. There is no ceiling on interest rates on these accounts. Holders of frozen (old) FCAs are permitted to purchase dollar bonds of the government of Pakistan against outstanding balances in their FCAs. Funds mobilized under the new FCA scheme are not required to be surrendered to the SBP, nor does the SBP provide forward cover for such accounts.
Domestic currency accountsThe accounts of individuals, firms, or companies residing outside Pakistan are designated nonresident accounts. Different rules apply to the nonresident rupee accounts of individuals, firms, or companies, on the one hand, and to the nonresident rupee accounts of banks, on the other hand. Banks are permitted to open nonresident accounts for nonbank nonresidents without prior SBP approval when the accounts are opened with funds received from abroad through banking channels or with rupee funds accepted for remittance abroad. Debits and credits to nonresident accounts for specified purposes may be made by authorized banks without prior approval. Foreign shipping companies and airlines with offices or agents in Pakistan may open and operate interest-bearing rupee accounts, provided the interest is used only to meet local expenses. Banks may issue bank cards as well as supplementary bank cards to individual nonresident rupee account holders. Withdrawals are allowed only in Pakistan.
Convertible into foreign currencyDomestic currency accounts are convertible into foreign currency when opened as convertible rupee accounts with funds received from abroad or credited with funds otherwise accepted for remittance abroad.
Blocked accountsAccounts of residents of India, other than the accounts of the Indian Embassy and its personnel, are blocked.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsADs are allowed to process the requests of importers for remittances up to a maximum of $10,000 or its equivalent on an advance payment basis for all eligible import transactions after verifying the bona fides of the underlying import transaction and ensuring that related shipping documents are submitted to them by the importers within four months of the advance payment. Advance payments of up to 50% of the cost and freight (CFR) value are allowed for imports of industrial capital goods, plant machinery, and manufacturing equipment, excluding spare parts. Payments exceeding this limit require SBP approval. Advance payments for capital goods require irrevocable LCs. Advance payments for noncapital goods imports are permitted up to 50% of the estimated CFR value on submission of evidence of bona fides and a bank guarantee. All other contracted modes of payment are admissible, but require the SBP’s prior approval. Foreign currency financing is available for a maximum period of 180 days.
Documentation requirements for release of foreign exchange for importsClean-on-board shipped bills of lading and other documentation as stipulated by contracts or LCs are required.
Domiciliation requirementYes.
Import licenses and other nontariff measuresImport licenses are not required.
Positive listA positive list is maintained with respect to imports from India.
Negative listMany of the products on the negative list consist of products banned for religious and health reasons and goods banned under international agreements.
Other nontariff measuresImports from Israel are prohibited. Imports of 60 items on the health and safety list are restricted. Imports of 26 items on the procedural list must meet certain technical requirements (e.g., petroleum) or certain other conditions (e.g., unassembled cars).
Import taxes and/or tariffsThe import tariff structure consists of five rates: 5%, 10%, 15%, 20%, and 25%; higher tariffs apply on beverages, liquor, spirits, motor vehicles, and vinegar. In general, a 6% tax is levied on the value of imports by commercial importers.
State import monopolyNo.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Exports and Export Proceeds
Repatriation requirementsProceeds must be repatriated through an AD by the due date or within six months from the date of shipment, whichever is earlier, except for general or specific exemptions of up to 285 days granted by the CB. Exporters may retain the export proceeds, including advance payments in foreign currency, with an AD, for three working days and sell them to ADs. ADs keep the retained proceeds in Special Exporters’ Accounts.
Surrender requirements
Surrender to authorized dealersExporters are required to sell export proceeds in the intrabank market within three days. Exporters may retain up to 10% of the f.o.b. value in their FCAs to effect payments for such expenses as advertising, purchases of designs and patterns, market studies, and bona fide export claims, and to cover export proceeds, without approval from the SBP. For software and service sector exports, this limit is 35%. Exporters reporting an increase of more than 10% in export earnings may keep 50% of the additional earned amount in FCAs.
Financing requirementsForeign currency financing is available for a maximum period of 180 days. All foreign exchange loans against intended exports may be settled only through export proceeds or remittances from abroad.
Documentation requirementsThe documents required are a firm order and Form E; however, the Goods Declaration Form (which will gradually replace Form E) has been introduced by Pakistan Customs for exports to be made through KICT, Karachi. The Form E requirement does not apply to exports of textbooks for schools and colleges for Pakistan students and other institutions operating under embassies abroad. This exemption also applies to literary, religious, educational, and general books if the value of individual shipments does not exceed $10,000 or its equivalent.
DomiciliationYes.
Preshipment inspectionPreshipment inspection is mandatory for basmati rice exports. Preshipment inspection quality review committee certificates are checked by customs at the time of export, in accordance with serial number 3 of schedule II to the Export Policy Order, 2006.
Export licensesNo.
Export taxesADs deduct an export development surcharge of 0.25% when the export proceeds are realized.
Other export taxesThe rates of income tax on export proceeds are 0.75%, 1.00%, 1.25%, and 1.50% of the proceeds of the exports listed in Parts I, II, III, and IV, respectively, of the Seventh Schedule of Central Board of Revenue.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersADs may issue foreign-currency-denominated traveler’s checks for any purpose, provided they are paid for with an equivalent amount of foreign currency. Exchange companies may freely transfer funds abroad on behalf of individuals.
Trade-related paymentsThe payment of freight against invoices is unrestricted. Commissions, brokerage fees, and other charges payable abroad are generally limited to 10% of invoice values. The following rates apply: 1% for cement, 2% for cotton, and higher rates for a few other goods.
Quantitative limitsYes.
Indicative limits/bona fide testIndicative limits or bona fide tests apply to the payment of commissions.
Investment-related paymentsThe remittance of dividends declared on current profits may be made freely to foreign shareholders if the investment was made on a repatriable basis. The remittance of profits by branches of foreign companies—other than banks and those engaged in insurance, shipping, and the airline business—and of dividends to foreign portfolio investors credited to their convertible rupee accounts is permitted without restriction. Remittances of royalty, franchise, and technical fees or service charges are allowed, subject to certain restrictions.
Quantitative limitsInterest payments are allowed up to 1.5% over LIBOR on borrowing for foreign currency working capital or general purposes. However, there is no limit on interest for project loans. The payment of interest is permitted for imports only on a usance basis.
Payments for travel
Quantitative limitsYes.
Indicative limits/bona fide testThe prescribed limit is $50 or its equivalent a person a day up to a maximum of $2,100 a calendar year. However, ADs may provide additional travel allowances in bona fide cases.
Personal paymentsForeign exchange allowances for students’ tuition fees and expenses, as required by institutions, may be obtained from ADs without approval from the SBP. No restrictions apply on remittances of premiums for all types of life insurance policies.
Other paymentsADs may release foreign exchange up to a maximum of $100,000 or its equivalent an invoice with respect to payments for information technology services. This applies to companies incorporated in Pakistan and branches of foreign companies that operate in Pakistan with the permission of the Board of Investment and that pay local taxes and repatriate their profits abroad. ADs may remit lease payments by airlines incorporated in Pakistan up to the guaranteed hours; payments for time over the guaranteed hours require SBP approval. No limits apply to subscriptions and membership fees paid by individuals. Insurance companies are allowed to issue health or medical policies in foreign currency to meet the guidelines for issuance of travel visas to Schengen countries. ADs are allowed to remit claims arising under such policies under the prescribed procedure.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersProceeds of foreign exchange earnings must be sold to an AD.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instrumentsWith prior SBP permission, Pakistan residents, as well as firms and companies, may make equity-based investments, other than portfolio investments, in companies abroad (i.e., joint ventures) on a repatriable basis. However, individuals may purchase and remit abroad foreign currencies through licensed exchange companies without any restrictions on amount and purpose. Locally established mutual funds are allowed to invest abroad for the purposes of diversifying their asset classes or portfolios up to 30% of the aggregate funds mobilized (including foreign currency funds) in permissible categories, subject to a cap of $15 million or its equivalent at any given time. Prior approval of the SBP and the Securities and Exchange Commission of Pakistan (SECP) is required (FE Circular No. 11, dated August 12, 2005).
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsBanks are authorized to open Special Convertible Rupee Accounts (SCRAs) for nonresidents to acquire quoted or listed securities with remittances from abroad. All dividends, capital gains, and disposal proceeds may be credited to these accounts for remittance abroad without reference to the SBP.
Sale or issue locally by nonresidentsNo controls apply on the sale of securities purchased in Pakistan. Nonresidents may solicit subscriptions for shares and debentures in Pakistan with prior SECP approval.
Purchase abroad by residentsPrior SBP approval is required.
Sale or issue abroad by residentsResidents may sell or issue securities with approval from the SECP. The proceeds associated with these issues must be transferred to Pakistan or used to purchase plants and machinery from abroad. Transfer of funds required to service these securities issues is permitted.
Bonds or other debt securities
Purchase locally by nonresidentsNonresidents are allowed to trade freely in registered corporate debt instruments and bonds listed on the stock exchange, federal investment bonds, Pakistan investment bonds (PIBs), and market treasury bills (MTBs). Foreign bank branches in Pakistan and foreign-controlled investment banks are permitted to make investments in registered, listed corporate debt instruments in the primary and secondary markets.
Sale or issue locally by nonresidentsThere are no controls on the sale of bonds and other debt securities purchased in Pakistan. Nonresidents may solicit subscriptions in Pakistan with prior SECP approval.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsPrior SECP approval is required.
On money market instruments
Purchase locally by nonresidentsNo controls apply to the purchase of certificates of investment, PIBs, MTBs, and term finance certificates by nonresidents.
Sale or issue locally by nonresidentsNonresidents are not permitted to issue such instruments in Pakistan.
Purchase abroad by residentsThese transactions are not permitted through ADs.
Sale or issue abroad by residentsResidents may sell or issue money market instruments after obtaining approval from the SECP. The proceeds associated with these issues must be transferred to Pakistan or used to purchase plants and machinery from abroad. The transfer of funds required to service these securities issues is permitted.
On collective investment securities
Sale or issue locally by nonresidentsThere are no controls on the sale of collective investment securities in Pakistan. Nonresidents may solicit subscriptions in Pakistan with prior SECP approval.
Purchase abroad by residentsThese transactions are generally not permitted through ADs.
Sale or issue abroad by residentsResidents may sell or issue securities after obtaining approval from the SECP. The proceeds associated with these issues must be transferred to Pakistan or used to purchase plants and machinery abroad. The transfer of funds required to service these securities issues is permitted.
Controls on derivatives and other instrumentsBanks that are authorized derivatives dealers may engage in financial derivatives transactions, including foreign currency options, forward rate agreements, and interest rate swaps, as provided for in Financial Derivatives Business Regulations; for all other structured derivatives, the SBP’s approval is required. Currently, single stock futures are the only exchange traded derivative instruments traded in Pakistan and are regulated by the SECP.
Purchase locally by nonresidentsNonresidents may purchase securities and bonds listed on the stock exchange.
Sale or issue locally by nonresidentsThere are no controls on the sale of securities purchased in Pakistan. Single stock futures are issued by the stock exchange and not by the companies themselves. Nonresidents are required by the SBP to open SCRAs.
Purchase abroad by residentsBanks are permitted to enter into derivatives transactions abroad to cover their positions for permissible categories without SBP approval.
Sale or issue abroad by residentsResidents may sell such securities with SBP or SECP approval.
Controls on credit operations
Commercial credits
By residents to nonresidentsCredits of up to six months are permitted with respect to exported goods, and up to 12.5 years with respect to the export of plants and machinery.
Financial credits
By residents to nonresidentsThese credits are not allowed. However, ADs may extend rupee overdrafts to foreign nationals locally up to the extent of their requirements.
Guarantees, sureties, and financial backup facilities
To residents from nonresidentsThese transactions are subject to compliance with other credit controls.
Controls on direct investment
Outward direct investmentDirect investment abroad requires prior approval under foreign exchange laws. Pakistan nationals as well as residents, including firms and companies, may make equity-based investments, other than portfolio investments, in companies abroad (i.e., joint ventures) on a repatriable basis. Locally established mutual funds are allowed to invest abroad for the purposes of diversifying their asset portfolio, up to of 30% of the aggregate funds mobilized (including foreign currency funds), in permissible categories subject to a cap of $15 million or its equivalent at any given time. Prior SBP and SECP permission is required.
Inward direct investmentPrior approval is not required for investment in the manufacturing, agriculture, infrastructure, social, and services sectors. Investment in arms and ammunition, security, printing, currency and minting, high explosives, and radioactive substances requires prior approval. New investment in the production of alcoholic beverages is prohibited. Foreign investments in the services, infrastructure, social, and agricultural sectors are permitted, subject to the condition that the foreign equity investment be at least $300,000 or the equivalent; for the services sector, the minimum investment is $150,000.
Controls on liquidation of direct investmentLiquidation proceeds must be repatriated to Pakistan through normal banking channels.
Controls on real estate transactions
Purchase abroad by residentsResidents are not permitted to purchase real estate abroad.
Controls on personal capital transactionsFamily remittances and all other remittances effected by nonresidents to residents not exceeding the equivalent of $10,000 are exempt from the requirement of filing forms; however, they must be declared to ADs.
Loans
By residents to nonresidentsYes.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsUp to PRs 500 is permitted.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer of gambling and prize earningsRemittance is not allowed.
References to legal instruments and hyperlinksForeign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; www.sbp.org.pk/epd/index.htm.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsBanks are required to maintain domestically not less than 80% of their assets against time and demand liabilities. Foreign-controlled investment banks are permitted to borrow locally for their working capital requirements up to 100% of their paid capital, reserves, etc., subject to observance of all other nonbank financial institutions’ rules.
Borrowing abroadTransactions are allowed for temporary periods, and only if they are necessary for the normal course of business.
Lending locally in foreign exchangeThese transactions are allowed only for financing exports and imports against foreign currency deposits of banks.
Purchase of locally issued securities denominated in foreign exchangeThere are no locally issued securities that are denominated in foreign currency.
Differential treatment of deposit accounts in foreign exchangeAll bank and nonbank financial institutions that accept foreign currency deposits may use deposited funds freely in Pakistan. Any other use is subject to prudential regulations.
Reserve requirementsBanks are required to maintain separate dollar cash reserves with the SBP against foreign currency deposits. The requirements are 5% in an unremunerated cash reserve account and 15% in a special cash reserve account for liquidity purposes, the interest rate of which is announced monthly. Effective July 22, 2006, rupee demand deposits and time deposits with maturity of six months or less are subject to a 7% (previously, 5%) cash reserve requirement (CRR), rupee time deposits with maturity of six months and longer are subject to a 3% (previously, 5%) CRR, and all rupee demand and time deposits are subject to an 18% (previously, 15%) special statutory liquidity requirement (excluding CRR), which must be held in approved securities. Nonbank finance companies (NBFCs) are required to keep 15% of their customer deposits in government or listed securities (Rule 12 (3) of NBFC Rules of 2003).
Liquid asset requirementsIn accordance with prudential regulations, balances must be kept in dollars.
Differential treatment of deposit accounts held by nonresidents
Liquid asset requirementsIn accordance with prudential regulations, balances must be kept in dollars.
Investment regulations
Abroad by banksAll bank and nonbank financial institutions that accept foreign currency deposits may use deposited funds freely in Pakistan. Any other use is subject to prudential regulations.
In banks by nonresidentsPrior approval is required.
Open foreign exchange position limitsEffective March 26, 2007, the aggregate foreign exchange exposure limit for each bank is 15% of its paid-up capital with a maximum of PRs 1.5 million. Previously, the aggregate foreign exchange exposure limit for each bank was equivalent to 10% of its paid-up capital, with maximum and minimum limits of the equivalent of PRs 500 million and PRs 50 million, respectively, and exceptions required prior SBP approval.
Provisions specific to institutional investors
Insurance companiesThirty percent of the shareholder fund of a life insurer or of a statutory fund of a life insurer other than that which contains only investment-linked policies must be invested in government securities. A further 10% of shareholder funds of a life insurer or of a statutory fund of a life insurer other than that which contains only investment-linked policies must be invested in a combination of government securities and other approved securities. Approved securities are defined in Section 2(iii) of the Insurance Ordinance as government securities and any other security based on the revenues of the federal government or of a provincial government, guaranteed fully as regards principal and profit or return (however called or designated) by the federal government or a provincial government, and any debenture or other security for money issued under the authority of any act of the federal legislature or any provincial legislature by or on behalf of the trustees of the port of Karachi; any security issued under the authority of any act of parliament or of a provincial assembly; and any security specified as an approved security for the purpose of this ordinance by the federal government by notification in the official gazette.
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyYes.
Pension fundsOnly locally incorporated life insurance companies and asset management companies are allowed to offer pension funds. Pension funds may invest in local equity, debt, and money markets. Other investments, including overseas investment, are subject to the approval of the SECP.
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyThe investment policy issued for pension funds sets various sector and security limits.
Currency-matching regulations on assets/liabilities compositionn.r.
Investment firms and collective investment fundsInvestment firms and collective investment funds may invest in securities 10% of the capital of the company or the net assets of the fund, whichever is smaller; the sectoral limit is 25% of the capital of the company or the net asset of the fund.
Limits (max.) on securities issued by nonresidentsNonresidents require prior approval from the SECP for issuance of securities in the local market.
Limits (max.) on investment portfolio held abroadThe SBP approves investment abroad and imposes limits on the size of investment. For the purposes of diversifying their asset classes or portfolios, locally established mutual funds are allowed to invest abroad up to 30% of aggregate funds (including foreign currency funds) in permissible categories, subject to a cap of $15 million or its equivalent at any given time. Prior approval of the SBP and the SECP is required.
Limits (min.) on investment portfolio held locallyYes.
Currency-matching regulations on assets/liabilities compositionn.a.
References to legal instruments and hyperlinksNonbanking Finance Companies (Establishment and Regulation Rules, 2003); Foreign Exchange Manual (eighth edition, 2002); FE circulars and circular letters; Prudential Regulations; www.sbp.org.pk/epd/index.htm; Banking Companies Rules of 1963; Voluntary Pension System Rules of 2005; Insurance Rules and Insurance Ordinance; FE Circular No. 11, dated August 12, 2005; www.secp.gov.pk/corporatelaws/pdf/VoluntaryPensionRules.pdf; www.secp.gov.pk/circulars/pdf/Cir_2005/Cir_08.pdf.
Changes during 2006
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJuly 22. The SBP raised the CRR on rupee demand deposits and time deposits with maturity of six months or less to 7% from 5%, reduced the CRR on rupee time deposits with maturity of six months and longer to 3% from 5%, and raised the statutory liquidity requirement (excluding CRR) on all rupee demand and time deposits to 18% from 15%.
Changes during 2007
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsMarch 26. The SBP raised the aggregate foreign exchange exposure limit for each bank to the equivalent of 15% (previously, 10%) of its paid-up capital, with a maximum of PRs 1. 5 million.

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