FOREIGN EXCHANGE REGULATION ACT, 1947
Act No. VII of 1947
[11th March, 1947]
An Act to regulate certain payments, dealings in foreign
exchange and securities and the import and export of currency and bullion.
WHEREAS it is expedient in the economic and financial interests of Pakistan to provide for the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion;
It is hereby enacted as follows:—
- Short title, extent and commencement. (1) This Act may be called the Foreign Exchange Regulation Act, 1947.
(2) It extends to the whole of Pakistan and applies to all citizens of Pakistan and persons in the service of Government wherever they may be.
(3) it shall come into force on such date as the Central Government may, by notification in the official Gazette, appoint in this behalf.
- Interpretation. In this Act, unless there is anything repugnant in the subject or context,—
(a) “authorised dealer” means a person for the time being authorised under section 3 to deal in foreign exchange;
(b) “currency” includes all coins, currency notes, bank notes, postal notes, money orders, cheques, drafts, traveler’s cheques, letters of credit, bills of exchange and promissory notes;
(c) “foreign currency” means any currency other than Pakistan currency;
(d) “foreign exchange” means foreign currency and includes any instrument drawn, accepted, made or issued under clause (8) of section 17 of the State Bank of Pakistan Act, 1956, all deposits, credits and balances payable in any foreign currency, and any drafts, traveler’s cheques, letters of credit and bill of exchange, expressed or drawn in Pakistan currency but payable in any foreign currency;
(e) “foreign security” means any security issued elsewhere than in Pakistan and any security the principal of or interest on which or payable in any foreign currency or elsewhere than in Pakistan;
(f) “gold” includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;
(g) “Pakistan currency” means currency which is expressed or drawn in Pakistan rupees;
(h) “owner”, in relation to any security, includes any person who has power to sell or transfer the security, or who has the custody thereof or how receives, whether on his own behalf or on behalf of any other person, dividends or interest thereon, and in a case where any security is held on any trust or dividends or interest thereon are paid into a trust fund, also includes any trustee or any person entitled to enforce the performance of the trust or to revoke or vary, with or without the consent of any other person, the trust or any terms thereof, or to control the investment of the trust moneys;
(i) “prescribed” means prescribed by rules made under this Act;
(j) “State Bank” means the state Bank of Pakistan;
(k) “security” means shares, stocks, bonds, debentures, debenture stock and Government securities, as defined in the securities Act, 1920, deposit receipts in respect of deposits of securities, and units or sub-units of unit trusts, but does not include bills of exchange or promissory notes other than Government promissory notes;
(l) “Silver” means silver bullion or ingot, silver sheets and plates which have undergone no process of manufacture, but does not include bills of exchange or promissory notes other than Government promissory notes;
(m) “transfer” includes, in relation to any security, transfer by way of loan or security.
- Authorised dealers in foreign exchange. (1) The State Bank may, on application made to it in this behalf, authorise any person to deal in foreign exchange.
(2) An authorisation under this section—
(i) may authorise dealings in all foreign currencies or may be restricted to authorising dealings in specified foreign currencies only;
(ii) may authorise transactions of all descriptions in foreign currencies or may be restricted to authorising specified transactions only;
(iii) may be granted to be effective for a specified period, or within specified amounts, and may in all cases be revoked for reasons appearing to it sufficient by the State Bank.
(3) An Authorised dealer shall in all his dealings, in foreign exchange comply with such general or special directions or instructions as the State Bank may from time to time think fit to give, and, except with the previous permission of the State Bank, an Authorised dealer shall not engage in any transaction involving any foreign exchange which is not in conformity with the terms of his authorisation under this section.
(4) An authorised dealer shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declarations and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of, any contravention or evasion of the provisions of this Act or of any rules, directions or orders may there under, and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorised dealer shall refuse to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the State bank.
- Restrictions on dealing foreign exchange. (1) Except with the previous or special permission of the State Bank, no person other than an authorised dealer shall in Pakistan and no person resident in Pakistan, other than an authorised dealer all outside Pakistan, buy or borrow from, or sell or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange.
(2) Except with the previous general or special permissions of the State Bank, no person whether an authorised dealer or otherwise, shall enter into any transaction which provides for the conversion of Pakistan currency into foreign currency or foreign currency into Pakistan currency at rates of exchange other than the rates for the time being authorised by the State Bank.
(3) Where any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as the case may be, the conditions cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer.
(4) Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made there under for the time being in force, any foreign exchange in the form of postal orders or money orders.
- Restrictions on payments. (1) Save as may be provided in and in accordance with any general or special exemption form the provisions of this sub-section which may be granted conditionally or unconditionally by the state Bank, no person in, or resident in, Pakistan shall—
(a) make any payment to or for the credit of any person resident outside Pakistan;
(b) draw, issue or negotiate any bill of exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favor of any person resident outside Pakistan;
(c) make any payment to or for the credit of any person by order or on behalf of any person resident outside Pakistan;
(d) place any sum to the credit of any person resident outside Pakistan;
(e) make any payment to or for the credit of any person as consideration for or in association with—
(i) the receipt by any person of a payment or the acquision by any person of property outside Pakistan;
(ii) the creation or transfer in favor of any person of a right whether actual or contingent to receive a payment or acquire property outside Pakistan;
(f) draw, issue or negotiate any bill of exchange or promissory note, transfer any security or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favor of any person as consideration for or in association with any matter referred to in clause (e).
(2) Nothing in sub-section (1) shall render unlawful—
(a) the making of any payment already authorised, either with foreign exchange obtained from an authorised dealer under section 4 or with foreign exchange retained by a person in pursuance of an authorisation granted by the State bank;
(b) the making of any payment with foreign exchange received by way of salary or payment for services not arising from business in, or anything done while in Pakistan.
(3) Nothing in this section shall restrict the doing by any person of anything within the scope of any authorisation or exemption granted under this act.
(4) For the purposes of this section, “security” also includes coupons or warrants representing dividends or interest and life or endowment insurance policies.
- Blocked accounts. (1) Where an exemption from the provisions of section 5 is granted by the State Bank in respect of payment of any sum to any person resident outside Pakistan and the exemption is made subject to the condition that the payment is made to a blocked account—
(a) the payment shall be made to a blocked account in the name of the person in such manner as the State Bank may by general or special order direct; and
(b) the crediting of that sum to that account shall, to the extent of the sum credited, be a good discharge to the person making the payment.
(2) No sum standing at the credit of a blocked account shall be drawn on except in accordance with any general or special permission which may be granted conditionally or otherwise by the State Bank.
(3) In this section “blocked account” means an account opened as a blocked account at any office or branch in Pakistan of a bank authorised in this behalf by the State Bank, or an account blocked, whether before or after the commencement of this Act, by order of the State Bank.
- Special accounts. (1) Where in the opinion of the Central government it is necessary or expedient to regulate payments due to persons resident in any territory, the Central Government may, by notification in the official gazette, direct that such payments or any class of such payments shall be made only into an account (hereinafter referred to as a special account) to be maintained for the purpose by the State Bank or an authorised dealer specially authorised by the state Bank in the behalf.
(2) The credit of a sum to special account shall, to the extent of the sum credited, be a god discharge to the person making the payment:
Provided that where eth liability of the person making the payment is to make the payment in foreign currency, the extent of the discharge shall be ascertained by converting the amount paid into that currency at such rate of exchange as is for the time being fixed or authorised by the State Bank.
(3) The sum standing to the credit of any special account shall from time to time be applied—
(a) Where any agreement is entered into between the Central Government and the Government of the territory to which the aforesaid notification relates for the regulation of payments between person resident in Pakistan and in that territory, in such manner as the state Bank having regard to the provisions of such agreement, may direct, or
(b) Where no such agreement is entered into, for the purpose of paying wholly or partly, and in such order of preference and at such times as the Central government may direct, debts due from the persons resident in the said territory to persons resident in Pakistan or in such other territories as the central Government may by order specify in this behalf.
- Restrictions on import and export of certain currency and bullion. (1) The Central government, by notification in the official Gazette, order that, subject the such exemptions, if any, as may be contained in the notification, no person shall, except with the general or special permission of the State Bank and on payment of the fee, if any, prescribed bring or send into Pakistan any gold or silver or any currency notes or bank notes or coin whether Pakistan or foreign.
Explanation.— The Bringing or sending into any part or place in the territories of Pakistan of any such article as foresaid, intended to be taken out of the territories of Pakistan without being removed from the ship or conveyance in which it is being carried, shall nonetheless be deemed to be bringing or as the case may be sending, into the territories of Pakistan of that article for the purposes of this section.
(2) No person shall, except with the general or special permission of the State Bank or the written permission of a person authorised in this behalf by the State Bank, take or send out of Pakistan any gold, jewellery or precious stones, or Pakistan currency notes, bank notes or foreign exchange.
(3) The restrictions imposed by sub-section (1) and (2) shall be deemed to have been imposed under section 19 of the Sea Customs Act, 1878, without prejudice to the provisions of section 23 of this Act, and all the provisions of that Act shall have effect accordingly.
- Acquisition by Central Government of foreign exchange. The Central Government may, by notification in the official Gazette, order every person in, or resident in, Pakistan—
(a) who owns such foreign exchange as may be specified in the notification, to offer it, or cause it to be offered for sale to the State Bank on behalf of the Central Government or to such person, as the State Bank may authorise for the purpose, at such price as the Central Government not less than the market rate of the foreign exchange when it is offered for sale;
(b) who is entitled to assign any right to receive such foreign exchange as may be specified in the notification, to transfer that right to the State Bank on behalf of the Central Government on payment of such consideration therefore as the Central Government may fix:
Provided that the Central Government may by the said notification or another order exempt any persons or class of persons from the operation of such order:
Provided further that nothing in this section shall apply to any foreign exchange acquired by a person from an authorised dealer and retained by him with the permission of the State Bank for any purpose.
- Duty of persons entitled to receive foreign exchange etc. (1) No person who has a right to receive any foreign exchange or to receive from a person resident outside Pakistan a payment in rupees shall, except with the general or special permission of the State Bank, do or refrain from doing any act with intent to secure—
(a) that the receipt by him of the whole or part of that foreign exchange or payment is delayed, or
(b) that the foreign exchange or payment ceases in whole or in part to be receivable by him.
(2) Where a person has filed to comply with the requirements of sub-section (1) in relation to any foreign exchange or payment in rupees, the State Bank may give to him such directions as appear to be expedient for the purpose of securing the receipt of the foreign exchange or payment as the case may be.
- Power to regulate the uses, etc., of imported gold and silver. The Central Government may, by notification in the official Gazette, impose such conditions as it thinks necessary or expedient on the use or disposal of or dealings in gold and silver prior to, or at the time of, import into Pakistan.
- Payment for exported goods. (1) The Central government may, by notification in the official Gazette, prohibit the export of any goods or class of goods specified in the notification from Pakistan directly or indirectly to any place so specified unless a declaration supported by such evidence as may be prescribed or so specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be, paid in the prescribed manner.
(2) Where any export of goods has been made to which a notification under sub-section (1) applies, no person entitled to sell, or procure the sale of, the said goods shall, except with the permission of the State Bank, do or refrain from doing any act with intent to secure that—
(a) the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade, or
(b) payment, for the goods is made otherwise than in the prescribed manner or does not represent the full amount payable by the foreign buyer in respect of the goods, subject to subject to such educations, if any, as may be allowed by the State Bank, or is delayed to such extent as aforesaid:
Provided that no proceedings in respect of any contravention of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full amount as aforesaid has not been made in the prescribed manner.
(3) Where in relation to any such goods the said period has expired and the goods have not been sold and payment therefore has not been made as aforesaid, the State Bank may give to any person entitled to sell the goods or to procure the sale thereof, such directions as appear to it to be expedient for the purpose of securing the sale of the goods and payment therefor as aforesaid, and without prejudice to the generality of the foregoing provisions, may direct that the goods shall be assigned to the Central Government or to a person specified in the directions.
(4) Where any goods are assigned in accordance with sub-section (3), the Central Government shall pay to the person assigning them such sum in consideration of the net sum recovered by or on behalf of the Central government in respect of the goods as may be determined by the central Government.
(5) Where in relation to any such goods the value as stated in the invoice is less than the amount which in the opinion of the State Bank represents the full export value of those goods, the State bank may issue an order requiring the person holding the shipping documents to retain possession thereof until such time as the exporter of the goods has made arrangements for the State Bank or a person authorised by the State Bank to receive on behalf of the exporters payment sin the prescribed manner of an amount which represents in the opinion of the State Bank the full export value of the goods
(6) For the purpose of ensuring compliance with the provisions of this section and any orders or directions made thereunder, the state Bank may require any person making any export of goods to which a notification under sub-section (1) applies to exhibit contracts with his foreign buyer or other evidence to whom that the full amount payable by the said buyer in respect of the goods has been, or will within the prescribed period be, paid in the prescribed manner.
- Regulation of export and transfer of securities. (1) No person shall, except with the general or special permission of the State Bank,—
(a) take or send any security to any place outside Pakistan;
(b) transfer any security or create or transfer any interest in a security to or in favor of a person resident outside Pakistan;
(c) transfer any security from a register in Pakistan to a register outside Pakistan or do any act which is calculated to secure, or forms part of a series of acts which together are calculated to secure, the substitution for any security which is either in, or registered in, Pakistan of any security which is either outside or registered outside Pakistan;
(d) issue, whether in Pakistan or elsewhere, any security which is registered or to be registered in Pakistan to a person resident outside Pakistan.
(2) Where the holder of a security is a nominee, neither he nor any person through whose agency the exercise of all or any of the holder’s rights in respect of the security is controlled shall, except with the general or special permission of the State Bank, do any act whereby he recognizes or gives effect to the substitution of another person as the person from whom he directly receives instructions, unless both the persons previously instructing him and the person substituted, resident in Pakistan.
(3) The State Bank may, for the purposes of securing that the provisions of this section are not evaded, require that the person transferring any security and the person to whom such security is transferred shall subscribe to a declaration that the transferee is not resident outside Pakistan.