SBP exempts investment upto $10 million abroad
Aftab Ahmed
The government has authorized the State Bank of Pakistan to grant an exemption to the residents for their investment up to US $ 10 million abroad.
Moreover, the State Bank of Pakistan (SPB) will grant waiver/exemption/regulation to the residents for their investment up to US $ 10 million. In contrast, cases over US$ 10.00 million will be submitted to the ECC.
Meanwhile, the government has introduced a new concept of sweat equity to allow resident individuals to acquire shares of companies abroad against their efforts and services, without any monetary consideration.
Benefits
This will enable resident individuals to acquire equity stakes in international firms through share option plans, sweat equity, or investment in listed securities, thereby providing opportunities to earn foreign exchange for the country in the form of repatriation of dividend and capital gain Pakistan.
The Finance division informed SBP suggested it would decide any exemption irrespective of the amount on each case’s merits.
The proposed policy retained the existing provisions governing investment abroad by resident companies/firms for expansion of the business. However, SBP proposed to authorize SBP for waiver/exemption and regularization irrespective of the amount involved as the requirements of this sector were time-bound and recurring in nature, especially capital injections.
Finance Division requested the ECC for approval of a draft policy on equity investment abroad. It was informed that after approval, this policy will be disseminated by SBP through an FE Circular and will become part of Chapter 20 of the Foreign Exchange Manual of the SBP.
During the ensuing discussion, the ECC appreciated the proposed policy and observed that it would facilitate Pakistani residents, including firms/companies, to make an equity-based investment in entities abroad.
Governor SBP suggested authorizing the State Bank of Pakistan (SPB) to grant waiver/exemption from the said policy to Pakistani residents for their investment up to US $.10.00 million. He further suggested sending a case of exemption over the US $ 10.00 million to the ECC.
DECISION
The Economic Coordination Committee (ECC) of the Cabinet considered the summary dated 15h January 2021 submitted by the Finance Division titled” Draft Policy on Equity Investment Abroad by Residents ” and approved the proposal.
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The ECC decided that the State Bank of Pakistan (SPB) would grant waiver/exemption/regulation to the residents for their investment up to US $ 10.00 million. However, ECC will decide the cases over US$ 10.00 million investment abroad.
