Easing inflows of capital.

Byline: Nasir Jamal

In almost the last two years, the State Bank of Pakistan (SBP) has taken quite a few initiatives to ease its foreign exchange regime to boost exports and attract foreign investments - direct and portfolio - as well as facilitate non-resident Pakistanis to bring in and take out their savings without any hassles. The latest in this series of actions taken by the central bank are revisions in its foreign exchange Manual to facilitate equity investment abroad by startups, fintech and exporters as notified earlier last month.

The new policy for equity investment abroad, for example, will attract foreign direct investment (FDI) through the establishment of holding companies by Pakistani fintech and startups, support exports by facilitating exporters to establish their subsidiaries or branch offices outside Pakistan. The changes will significantly improve the overall investment regime as well as foster new entrepreneurial culture in the country.

Following the changes in the foreign exchange regulations, the exporters will now be able to establish their subsidiaries or branch offices for promoting their exports without any approval from the SBP, and the banks will be allowed to remit funds up to 10 per cent of their average annual export earnings of the last three calendar years or $100,000 or whichever is higher abroad on their behalf.

The banks have also been allowed to remit $30,000 from the second year onward to meet the annual budgeted expenses of the representative office established or acquired abroad with an annual increase of 10pc in expense. This has met the longstanding demand of exporters in general and IT firms in particular, which were facing difficulties in running their foreign operations because of previous, outdated SBP regulations. The new policy will give exporters space to explore new markets and capture more export business.

The SBP's revisions to its foreign exchange manual will significantly improve the overall investment regime as well as foster new entrepreneurial culture in the country

The amendments in the foreign exchange regulations seek to ease the anxiety in the heads of international venture capitalists who are willing to finance Pakistani start-ups and fintech but prefer to invest indirectly through holding companies established abroad by allowing the resident companies up to seven years to establish their holds abroad for raising capital. They can remit up to $10,000 for this purpose and the...