Foreign Exchange Regulations in Pakistan

The Policy Research Institute of Market Economy (PRIME) has published a review of the foreign exchange regulations in Pakistan. The report notes that regulatory policies by the State Bank of Pakistan and other regulators are not conducive to attracting FDI in the country. These regulatory constraints inhibit entry, proper utilization and exit of funds for any foreign investor to invest in startups and venture capital firms in Pakistan. Internationally, countries whose GDP has grown at high rates have been countries which relatively have lesser restrictions on entry of capital as well as foreign direct investment. The publication includes case studies of China, India, Malaysia and Turkey. These countries started off with similar.

economies and economic policies pertaining to foreign exchange regulations, however overtime these countries adapted policies and measures to open their economy and ensure financial freedom for increased investments. The report recommends that Pakistan needs to adopt measures to open up its economy and ensure freedom of capital for encouraging investments. Through structural reforms it needs to simplify procedures for foreign investment, introduce transparent operations and reduce regulations. The think tank also recommends that the State Bank should hold periodic audits of companies to help categorize entities. For example, entities assuming forex risk upon themselves compared to those who do not assume the risk. Restrictions and regulations should then vary for both.

To read more, download the file: