KARACHI: The State Bank of Pakistan (SBP) has halved the cash-carrying limits on foreign currency for international travel to $5,000 (or equivalent in other foreign currencies) per visit and $30,000 per year for citizens aged 18 years or above, it said in a statement on Tuesday.

Both ceilings will be half for under-18s (minors), i.e. $2,500 per visit and $15,000 per year.

However, for people travelling to Afghanistan, the limit for taking out cash foreign currencies will remain unchanged at $1,000 per visit and $6,000 per year.

The same annual limit — i.e. $30,000 — now also applies to international transactions through debit and credit cards.

Separately, the SBP and the Federal Investigation Agency (FIA) have decided to team up against illegal foreign exchange operators — those that aren’t authorised by the central bank to do this business — to curb speculation and the grey market.

The central bank said the per-visit limits for travel cash would be applicable immediately, whereas the annual limits would go into effect from Jan 1, 2023.

Besides, the SBP observed that debit and credit cards were being used for transactions that “are not aligned with the profile of the individual or are intended for commercial purpose” and therefore prescribed an annual limit of $30,000 on international transactions.

It advised banks to “ensure that the use of debit and credit cards for international transactions was aligned with the profile of cardholders and for their personal needs only”.

“It is emphasised that the purpose of debit/credit cards is to facilitate individuals in making payments for transactions that are of personal nature. The limits on these cards as well as payments through them, both domestic and international, should therefore be aligned with the profile of the cardholder,” it said.

“It shall be the responsibility of a customer to ensure that his/her annual limit is not breached at any time. However, banks are required to monitor these limits on a consolidated basis for each individual,” it said.

As for using cards for cross-border transactions to meet “legitimate business-related needs”, the SBP said a framework was already available under Para 14A of Chapter 14 of the Foreign Exchange Manual, under which entities could designate a bank to use this facility according to defined limits.

“Besides, a general framework for the acquisition of services by firms and companies has been given in Para 11, Chapter 14 of the Foreign Exchange Manual,” the bank said.

SBP, FIA team up

The decision on a joint SBP-FIA action against illegal foreign exchange operators was taken in a high-level meeting on Tuesday between SBP’s governor and FIA’s director general.

They “took stock of illicit foreign exchange activities and chalked out a comprehensive plan of action against illegal foreign exchange businesses being carried out in the country”, the central bank said in a statement on Tuesday.

Both agreed that joint effort was needed to “apprehend and implicate the illegal foreign exchange operators and speculators across the country”, it said.

Joint teams of the SBP and the FIA will now identify and penalise such operators “while remaining within the legal mandate allowed to them by the relevant laws”, the statement said.

“Banks and exchange companies are authorised by the SBP to carry out foreign exchange business in Pakistan. Involvement of any person or entity, other than banks and exchange companies, in foreign exchange business is illegal under the Foreign Exchange Regulation Act, 1947,” it said. “The illegal foreign exchange business also adversely affects the open market exchange rate and increases the gap between the interbank and open market exchange rate.”

The latest wave of currency smuggling, mostly to Afghanistan, is a serious cause of concern since that sanctions-hit country must depend on Pakistan for its exports and imports.

Exchange companies say thousands of such illegal forex firms are working across the country, helping smugglers buy dollars.

“We estimate that about 30,000 illegal foreign exchange companies are operating across the country,” said Malik Bostan, chairman of the Exchange Companies Association of Pakistan. “They destroy the exchange rate by offering Rs10 to Rs15 more per dollar, equal to the rate prevailing in Afghanistan.”

Published in Dawn, November 9th, 2022