Sending money to Pakistan is relatively unrestricted, and non-residents are permitted to hold Pakistani bank accounts denominated in foreign currency. There are many restrictions in transferring money out of Pakistan as explained in more detail below.
The State Bank of Pakistan (SBP), the central bank, has liberalised, foreign exchange transactions in the last two decades. In the past, all foreign reserves had to be turned over and held at the SBP, which allowed the central bank to strictly control foreign exchange transactions. Today, commercial banks and other authorised dealers are free to hold and exchange foreign currencies, although all forex transactions must go through a broker that has been licensed by the SBP.
In January 2014, the central bank lowered the amount of hard currency that may be brought in or out of the country at one time from US$10,000, the average global standard, to US$5,000.
Getting foreign currency out of the country is challenging, for both individuals and investors. Strictly speaking, there are no restrictions on the overseas transfer of funds related to investment in Pakistan, including the remittance of capital, profits, capital gains or payment for imported goods used in manufacturing. However, the US State Department indicated in 2014 that banks continue to face difficulty with such transfers; in many cases, banks are required to justify all outgoing foreign currency transfers with trade documentation, slowing down the process. Moreover, investors are required to register their operation with the SBP within 30 days in order to receive approval for future remittances.
However, the central bank announced new rules in April 2014 that should make capital movement easier. Under the new rules, domestic and foreign firms with a minimum of US$100m in annual foreign exchange income will be able to transfer large sums more freely, a move that authorities hope will encourage more direct investment in China.
The SBP is the sole entity charged with monitoring the health of the financial system. The SBP sets monetary policy, monitors the foreign exchange market in order to stabilise its currency reserves, and oversees banks and other financial institutions.
The SBP’s exchange rate policy has been gradually liberalised since the early 1980s, when the Pakistani rupee was pegged to the US dollar (USD). The central bank agreed to make the rupee a convertible currency in 1994, and moved it to a market-based floating exchange rate in 1999. The SBP nevertheless intervenes occasionally in the foreign exchange market to ensure that the rupee’s value remains stable and that the country has sufficient foreign reserves.
Pakistan is a particularly difficult environment for doing business, due largely to the opaque business climate, uncertain security situation and frequent energy shortages. The government remains generally open to foreign investment but maintains strict currency controls, particularly for capital being sent out of Pakistan. Consumer price inflation has remained stubbornly high in recent years, but has declined from 11% in 2012 to 7.4% in 2013 and held relatively steady at an annualised rate of 7% in August 2014, which gives the central bank some elbow room to lower interest rates and stimulate private sector growth.
Sending money into Pakistan is much less difficult. Pakistan was the seventh-largest recipient of remittances in 2013. Its annual remittance flows have doubled in the last five years from US$7bn in 2008 to US$14.6bn in 2013 as worker migration flows increased both in number and in skill level.
The country’s monetary unit, the Pakistani rupee (PKR), is frequently abbreviated as Rs. The State Bank of Pakistan issues banknotes in denominations of Rs10, Rs20, Rs50, Rs100, Rs500, Rs1,000 and Rs5,000. Coins are minted in values of 1, 2 and 5 rupees.
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