KARACHI: The State Bank of Pakistan (SBP) on Wednesday allowed five days forward sales and purchase of foreign exchange against export proceeds in order to facilitate managing exchange rate risks associated with realization of export proceeds.
The SBP issued following two circulars in this regard.
Five Days Forward Sale Facility against Export of Permissible Foreign Currency Notes
The SBP invited attention all Exchange Companies is invited to the instructions contained in Para (9)(i)(e), Chapter (3) of the Exchange Companies Manual whereby Exchange Companies are allowed to sell foreign exchange in Ready, Tom and Spot value dates, with banks as counterparty (Interbank Market).
2. In order to facilitate Exchange Companies in managing exchange rate risks associated with realization of export proceeds against export of permissible foreign currency notes, it has been decided that Exchange Companies may enter into forward sale transaction with banks up to 5 working days against export proceeds in US Dollars.
3. Accordingly, a new sub-para (e) (i) at Para (9) of Chapter (3) ibid has been added as under:
“Exchange Companies may sell forward the export proceeds received from abroad in US Dollars to banks against the export of permissible foreign currencies made on consignment basis through cargo/security companies subject to adherence of following terms and conditions:
a. Forward sale facility may be availed up to maximum five working days (including both transaction and settlement days).
b. In case Exchange Companies sell forward the export proceeds for less than five working days, forward sale period may be extended provided that the total period of forward sale, including the extended period, does not exceed five working days (including both transaction and settlement days). However, such extensions will be made by closing out the original contract and booking of a fresh contract at the new rate.
c. Forward sale may be booked before or after the export shipment.
d. Exchange Companies are required to bring export proceeds within 5 working days from the date of shipment. In case forward sale is booked on or after the shipment date, maximum maturity date of forward sale facility may be up to 5th working day of shipment date.
e. Forward sale may be booked for full or partial value of export proceeds against export shipment.
f. Forward sale will be booked based on specific export shipment. For this, Exchange Company shall provide copy of export documents including deal ticket confirmed with foreign buyer to the bank. In case of advance booking, Exchange Companies will submit copy of deal ticket confirmed with foreign buyer to the bank, while copy of other export documents will be submitted subsequent to the shipment.
g. No substitution is allowed for settlement of export proceeds.
h. Forward contracts, which are not taken up, may be closed out on the date of maturity at prevailing spot rate. Exchange gain, if any, will not be passed on to the Exchange Company, rather the same will be deposited in favor of State Bank of Pakistan by the bank. To this effect, the Exchange Companies are required to provide their consent/agreement in writing as prescribed by the bank before entering into forward contract.
4. Further, sub-para (i) of Para (4) of Chapter (5) ibid stands revised as under:
“Exchange Companies exporting permissible foreign currencies shall repatriate equivalent US Dollars in their foreign currency accounts maintained with banks in Pakistan. Such US Dollars against exports must be credited in foreign currency accounts within five working days from the date of export of foreign currencies”.
5. F.E. Circular No. 03 dated February 24, 2021 issued to Authorized Dealers is attached herewith for ready reference.
6. All other instructions relating to the subject shall remain unchanged.
Five Days Forward purchase Contract with Exchange Companies against Export of Permissible Foreign Currency Notes
The SBP invited attention of all Authorized Dealers is invited to the instructions contained in Chapter (4) of the Foreign Exchange Manual in terms of which Authorized Dealers may enter into contracts for forward purchase or sale of foreign currencies subject to the regulations set out in this chapter.
2. In order to facilitate Exchange Companies in managing exchange rate risks associated with realization of export proceeds against the export of permissible foreign currency notes, it has been decided that Authorized Dealers may enter into forward purchase transactions with Exchange Companies.
3. Accordingly, a new Para ‘3A’ has been added in Chapter (4) ibid as under:
“Forward Purchase of foreign exchange in US Dollars against export of foreign currencies by Exchange Companies licensed by SBP”.
i. Authorized Dealers may purchase forward the export proceeds in US Dollars received from abroad against export of permissible foreign currencies by Exchange Companies, subject to adherence of following terms and conditions:
a. Forward purchase facility may be provided up to maximum five working days (including both transaction and settlement days).
b. In case Authorized Dealers purchase forward the export proceeds in US Dollars against exports of permissible foreign currencies for less than five working days, Authorized Dealers may extend the maturity date provided that the total period of forward purchase, including the extended maturity period, does not exceed five working days (including both transaction and settlement days). However, such extensions will be made by closing out the original contract and booking of a fresh contract at the new rate.
c. Forward purchase may be booked before or after the export shipment.
d. Exchange Companies are required to bring export proceeds within 5 working days from the date of shipment. In case forward purchase is booked on or after the shipment date, maximum maturity date of forward purchase facility may be up to 5th working day of date of shipment.
e. Forward purchase may be booked for full or partial value of export proceeds against export shipment.
f. Forward purchase will be booked based on specific export shipment. For this, Authorized Dealers shall obtain copy of export documents from Exchange Companies. In case of advance booking, copy of confirmed deal ticket shall be obtained from Exchange Companies, while copy of other export documents shall be obtained subsequent to the shipment.
g. No substitution is allowed for settlement of export proceeds.
h. Forward contracts, which are not taken up, may be closed out on the date of maturity at prevailing spot rate. Exchange gain, if any, will not be passed on to the Exchange Company, rather the same will be deposited in favor of State Bank of Pakistan by Authorized Dealer. In case of exchange loss, the same will be recoverable from Exchange Company by Authorized Dealer. To this effect, the Authorized Dealer should get consent/agreement signed by the concerned Exchange Company before entering into forward contract. The exchange gain shall be deposited in favor of the State Bank through RTGS Clearing Account No. 427517. In this respect, a consolidated statement regarding all such cases shall be submitted by Head/Principal Office of Authorized Dealers to the Director, Off-Site Supervision & Enforcement Department on monthly basis as per prescribed format (Appendix V-145) in excel file at email ec.osed@sbp.org.pk
4. In addition to above, Authorized Dealers may continue to purchase foreign exchange in Ready, Tom and Spot value dates, from Exchange Companies.”
