The government has stopped people from depositing foreign currency bought in the open market in bank accounts.

The government has stopped people from depositing foreign currency bought in the open market in bank accounts.

According to the local newspaper Dawn News, the new rules issued by the government have significantly changed the content already in the SBP's Foreign Exchange Manual (FEM). Chapter 6, under which all private foreign currency accounts are opened across the country, sets out the conditions for all FE-25 foreign currency deposits.

It clearly states that once these accounts are opened, the foreign currency borrowed from it, payment for exports or services rendered in or from Pakistan, the amount of security issued or sold to foreigners. However, the proceeds from the Pakistani company's overseas operations and 'foreign exchange purchased from any authorized dealer for any purpose in Pakistan' cannot be filled.

However, the government on Friday reiterated these laws and issued new laws under the Protection of Economic Reforms Act 1992 through an SRO. Payments, payment for services provided in or from Pakistan, security amounts issued or sold to non-residents and loans received from abroad through such means will not be credited.

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The government notification states that foreign currency purchased from a competent dealer, exchange company or money changer will not be credited to the foreign currency account unless the SBP allows it by general or special permission under a law. However, the laws allow it to deposit foreign currency fully disclosed in front of Pakistan Customs at the time of entry into the country, as well as other bank accounts. Foreign currency transferred from the net is also allowed. In this regard, currency experts said that these new measures could reduce the flow of dollars in banks.

Malik Bostan, president of the Forex Association of Pakistan, said all new laws would curb money laundering, especially in the case of exports to Afghanistan and Iran, as most traders do not work with these countries through banking channels. According to him, the new rules made it mandatory for everyone to seek permission from the SBP to deposit dollars in a foreign currency account first, and that the new rules were designed specifically in the context of Iran-Afghan trade. Most of the first trade transactions with Afghanistan and Iran are made using dollars purchased from the open market, he said.