Foreign currency transfers

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Editorial
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The law allows it and it suits everyone just fine.

 

The National Assembly Standing committee was informed by an SBP official yesterday that more than $7.9 billion had been transferred out of the country over the past five years by individuals holding foreign currency (FCY) accounts with scheduled banks.

 

The committee was told that the central bank and the tax authorities can do little or nothing to restrict this movement of money as the ‘Protection of Economic Reforms Act (PERA) of 1992’ proscribes no limit on the amount of transfer nor does it require an individual to seek the central bank’s permission

 

An obvious question to ask would be why, in a country where there is a hand to mouth situation with regards to its foreign exchange reserves (reserves that are mostly built upon loans), are there not more restrictions in place to discourage individuals making these transfers? But then if parliamentarians, who in fact made the law in the first place, are unwilling to keep their money here and who use the same mechanism to transfer it, why shouldn’t the people do the same?

 

PML-N is widely perceived to be a pro-business party but out of the total $7.9 billion that was transferred in the last five years, $5.7 billion was sent abroad in the period 2013-2015. Over and above this, around $601 million was sent specifically for setting up businesses in the last three years.

 

This flight of capital is also symptomatic of a lack of ease of doing business in Pakistan. Energy generation is one issue but continually increasing existing indirect taxes rather than focusing on widening the tax base also makes investors apprehensive. Foreign Direct Investment (FDI) follows local investment, it is hence no surprise that both are at abysmally low levels.

 

A hospitable environment for doing business followed by lawmakers of the country bringing their own money back to the country would be encouraging for individuals here and investors abroad. Changing the law to restrict the movement of foreign currency comes much later.

 

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