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Investigation to be completed by end of month, SBP says

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The SBP building in Karachi. News/Dossier

ISLAMABAD: Governor of the State Bank of Pakistan (SBP), Jameel Ahmad, informed the Senate panel on Friday that the investigation into currency manipulation with the alleged involvement of banks to make high profits would be terminated by by the end of the current month.

State Finance Minister Aisha Ghous Pasha has asked the SBP to impose the maximum sanctions against commercial banks involved in the minting of billions of rupees in order to put in place an “effective deterrent”.

SBP Governor Jameel Ahmad told reporters after the Senate Standing Committee on Finance meeting that the SBP had taken administrative measures to control the outflow of dollars. “We imposed payment limits of $30,000 per credit card and estimated that this step could save $500 million out of total payments of $1.4 billion on an annual basis,” said the governor.

He added that the ongoing investigation had been extended to more banks. Initially, the central bank issued show cause notices to eight commercial banks. He said the SBP had not revised the current account deficit upward projection for the current fiscal year and that it would remain around $10 billion.

Earlier, the Senate Standing Committee held its meeting under the chairmanship of Senator Saleem Mandviwalla in Parliament. Some senators have called on the government to revoke the license of those banks involved in the alleged currency manipulation.

In its written response, the SBP told the Inspected Banks’ Sell/Buy Transaction Review Board that the overall increase in banks’ foreign exchange earnings was mainly due to higher spreads due to increased volatility. . “This has been taken seriously and as such, SBP has taken enforcement action by sending show cause notices to inspected banks. After completion of due process, enforcement action will be taken accordingly” , indicates the answer.

Governor SBP told senators that the central bank had issued instructions to clear letters of credit (LC) of $100,000 that were on hold due to dwindling foreign exchange reserves. He said remittances on export earnings could be obtained from banks provided reasonable premiums are offered by the banks. He said 80% of the letters of credit have been erased while the rest require central bank clearance.

The Senate panel was told that 2,800 containers were stuck at the port, 640 of which contained hazardous materials and wheat. FBR Chairman Asim Ahmed said their revenue was involved and container clearance could not be done due to LC restrictions and non-payment of demurrage.

Member customs told the committee that 100% surcharges were imposed on these containers. The committee members asked the government to solve this problem through coordination between the FBR, the SBP and the port authorities.

The meeting began with a detailed discussion on the harassment felt by law-abiding and tax-paying citizens of Pakistan due to the shortcomings of the online system introduced to facilitate the filing of tax returns.

Senator Kamil Ali Agha recounted the case where he received notice 111, the final notice, after which no recourse was available. He urged the committee to look into the matter and ensure that these tactics used by the FBR are curbed. He shared with the committee details of his online tax returns that were filed before the deadline.

Discussing tobacco taxation whereby the government imposed an advance withholding tax of Rs 390 per kg on tobacco, Senator Dilawar said it was aimed at shutting down domestic players on the wish of two multinational giants. The committee did not ask the FBR why national actors objected to such a tax, which was adjustable and which they could recover when the final tax debts were settled. The Minister of State for Finance and Revenue assured the committee that every effort would be made to keep things on track.

Considering the point of public importance raised by Senator Kamran Murtaza regarding the dismissal of daily wage employees recruited by the Balochistan Customs Department, the committee took the issue seriously and raised questions regarding the minimum wage. The committee ordered the customs department to share full details of the employees and said it was also a violation of the quota system.

While addressing the issue of importation of vintage cars into Pakistan, the committee felt that unnecessary restrictions in this regard were unnecessary and efforts should be made to facilitate this trade.

The committee was informed that no restrictions were imposed by the Department of Finance and Revenue and that the matter was with the Department of Commerce.