E Circular No. 08 of 2008 July 08, 2008


The Head/Principal Offices of all
Authorized Dealers in Foreign Exchange

Dear Sirs/Madam,

Amendments in Foreign Exchange Regulations

With a view to rationalize the foreign exchange markets, State Bank of Pakistan has taken the following measures with immediate effect:

1. Forward Cover Facility against Imports
Attention of Authorized Dealers is invited to para 4 of Chapter IV of FE Manual 2002 amended vide FE Circular No. 16 dated November 01, 2004 and other instructions, in terms of which Authorized Dealers were allowed forward booking against imports on L/C basis.

In this respect, it has been decided to temporarily suspend forward booking against all types of imports. Authorized Dealers are, therefore, advised not to sell to their customers, foreign exchange on forward basis against imports. Commitments already made will, however, be honored by them in accordance with the terms of related contracts subject to compliance of related rules and regulations.

2. Advance Payment against Imports
Attention of the Authorized Dealers is invited to FE Circular No.03 dated April 29, 2008 in terms of which importers were allowed to effect advance payment to the extent of 50% of the FOB or CFR value of the goods to be imported subject to observance of terms and conditions mentioned therein. It has now been decided that the said facility will be available only to the extent of 25% of the FOB or CFR value of the goods to be imported. Other instructions on the subject will remain unchanged.

3. Payments against import of POL Products
Attention of the Authorized Dealers is invited to EPD Circular Letter No. 16/2(47)-2007 dated July 11, 2007 according to which 1) all purchases of foreign currency related to the import of Furnace oil were to be made by the Authorized Dealers from the Interbank market 2) all POL related foreign currency purchases which are made on the basis of specific Form ‘M’ approval issued by the Exchange Policy Department were to be made by Authorized Dealers from the interbank market. It has now been decided that State Bank of Pakistan will provide foreign exchange to the Authorized Dealer for the import of all categories of Furnace oil and also against the above mentioned Form ‘M’ approvals.

State Bank of Pakistan will also continue to provide foreign exchange to Banks for the import of all other POL products including those specified in point No.1 & 2 above (as per EPD Circular letter No.12/Policy-2004 dated November 01, 2004).

4. Cut-Off Timings for dealing by Banks Treasuries
Attention of the Authorized Dealers is invited to FSCD Circular No. 02 dated Jan 24, 2007 in terms of which the cut-off time for all types of Foreign Exchange Transactions was set upto 4:30 pm Monday through Friday and upto 1:00 pm on Saturday. It has now been decided to set the cut-off timing for all types of Foreign Exchange Transactions by Authorized Dealers with their customers and in the Inter-Bank market upto 2:00 pm Monday through Thursday and upto 1:00 pm for Friday and Saturday. Authorized Dealers are, however, allowed to transact foreign exchange swap transactions in the Inter Bank market upto 4:30 pm Monday through Friday and up to 1:00 pm on Saturday. Inter Bank swaps would include normal swap transactions involving two simultaneous transactions with the same Authorized Dealer and exclude any structured Foreign Exchange Swaps i.e. two outright transactions with different Authorized Dealers.

Authorized Dealers are advised to bring the above to the notice of their constituents for strict compliance.
Yours faithfully,

Sd/-
(Syed Samar Hasnain)
Director