The State Bank of Pakistan (SBP) has notified changes in chapter 8 (Non Resident Rupee Account)and chapter 20 (Securities) of the foreign exchange manual (the Manual) through EPD Circular Letter No. 01 of 2021 and FE Circular No. 01 of 2021 dated February 10, 2021 and February 11, 2021 respectively
The changes in chapter 8 of the Manual can be summarized as follows:
- SBP has allowed the trading of units of funds quoted at Stock Exchange, including Exchange Traded Funds (ETF), Real Estate Investment Trust (REIT) Funds and close-end mutual funds, through Special Convertible Rupee Accounts (SCRA) and PKR version of Roshan Digital Account (NRP Rupee Value Account (NRVA)).
- These account holders have also been allowed to invest in units of Mutual Funds registered as Open-End Schemes (OES) under the management of Asset Management Companies (AMCs) licensed by SECP to provide asset management services.
- SBP has also allowed the private funds established and operated by Private Fund Management Companies licensed by SECP to provide private equity and venture capital fund management services, to issue units of their funds to non-resident investors.
The changes in chapter 20 of the manual can be summarized as follows:
- The revised policy allows Pakistani residents to establish a holding company abroad for raising capital abroad. In this respect remittance amounting to USD $ 10,000 may be allowed by SBP.
- Export oriented companies have now been allowed to establish subsidiary/ branch office abroad against remittance of 10% of the average export earnings of last 3 calendar years or USD $ 100,000 whichever is higher.
- Resident individuals have been allowed to acquire equity stake in international firms through share option plans or investment in listed securities subject to the observance of the ceiling.
- In case of sweat equity a person can acquire up to 20% shareholding in a foreign company.
The above mentioned changes aim to increase the flow of foreign remittance through increased export and through foreign direct investment in Pakistan. The above mentioned changes are in line with the vision of this government to facilitate the relevant stakeholders in channelizing foreign exchange remittance in Pakistan hassle free.