Pakistan's Top Bank Restricts Cash Dollar Transactions

Pakistan's central bank has taken steps to limit the cash flow of US dollars to individuals as part of its policy to prevent the Pakistan rupee from devaluing in the market and curtail undocumented outflow of dollars.

The State Bank of Pakistan has issued a circular directing banks not to pay any cash in dollars to customers who do not have foreign currency accounts. At the same time, it has instructed all currency exchange dealers to limit the payment of dollars to USD 500 to customers and only provide further dollars after they complete a verification process confirming their requirement for the dollars.

Under the new instructions, banks will now transfer dollars directly into the purchasers' accounts. An exchange company official said the decision should not affect the purchase of dollars for travel or other purposes, but customers will need to provide proof of the need for dollars. The SBP circular said: "In order to promote cashless economy, it has been decided that, henceforth, all FCY (foreign currency) sale transactions to resident citizens of Pakistan for the purpose of deposit into FCY account will be executed through account-to-account transfer." This means individuals buying dollars for deposits will no longer receive cash; instead, the amount will be transferred directly to their accounts.

Those without foreign currency accounts will not be able to buy cash dollars from banks. "Even if you buy dollars from an exchange company for deposit to an FCY, the company will issue a cheque of that amount, which will be deposited in the FCY account of the bank," said Sardar Naseem of Galaxy Exchange. Individual buyers will not be able to purchase more than USD 500 without providing the purpose, supporting documents, and will have to undergo biometric verification. Even those going for Hajj, Umra or studies will have to provide complete documentation to buy over USD 500.

Currency experts said individuals buying euros or pounds will face longer delays. Any euro or pound purchased from an exchange company will be issued via cheque, which will take five to seven days to clear if deposited in the buyer's FCY account. Naseem said the new instructions were apparently aimed at controlling the outflow of dollars and also preventing money changers from holding large amounts of cash dollars in banks' accounts, meaning they will have to sell directly in the banking market.