SBP limits outbound travellers to $5,000 per visit as currency pressure mounts

KARACHI: The State Bank of Pakistan (SBP) on Tuesday tightened limits on travellers carrying foreign currency as it seeks to conserve the scarce dollar.

The central bank said it has rationalised limits for foreign exchange cash carrying for travel and cross border transactions through debit or credit cards. “As per the revised limits, individuals with age 18 years and above can now take out of Pakistan foreign currency (FCY) equivalent to $5,000 per visit, while those below the age of 18 years can carry out FCY equivalent to $2,500 per visit,” it said. “Further, the annual ceiling to take out FCY for adults and minors shall be $30,000 and $15,000, respectively.”

Previously, a traveller was allowed to carry $10,000 in foreign money. The annual ceiling for adults was previous cap at $100,000.

Per visit limits will be applicable immediately, while the annual limits will be applicable from January 1, 2023. The country has been struggling with a shortage of dollars exacerbated by the knock-on effects of the political uncertainty, which has put pressure on the currency and slowed down exports.

“For taking out foreign currencies by persons travelling to Afghanistan, the existing limits prescribed earlier as per the SBP notification issued on October 06, 2021 will remain unchanged,” the SBP said.

Analysts said the decision indicates the graveness of foreign exchange situation in the country. Besides, the SBP also looks to stabilise the local currency by using a number of administrative controls.

“I think we may see even tougher controls going forward unless our external position improves, especially the level of forex reserves including meeting reserve targets set by the IMF [International Monetary Fund],” said Mustafa Mustansir, the head of research at Taurus Securities.

The rupee has been under pressure due to strong demand for the greenback, particularly in the open market. The rupee closed at 221.65 per dollar in the inter-bank market. It was trading at 227.75 in the kerb market. The central bank’s forex reserves stood at $8.9 billion as of October 28.

To a query if the country is one or two steps short of freezing foreign currency accounts, Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, said, “That’s too harsh in my view. We won’t freeze foreign currency accounts.”

Fahad Rauf, the research head at Ismail Iqbal Securities, also doesn’t agree that the government is close to freezing FCY accounts as there is support coming from bilateral/multilateral sources, which would help it in managing FX reserves.

“These steps are continuation of various steps to curb dollar outflow from the system. This could be annoying for some legitimate remitters but we don’t have much of a choice at this point in time,” Rauf added.

The SBP has also prescribed an annual limit of $30,000 for individuals for international transactions. The SBP has observed that debit/credit cards are being used for transactions, which are not aligned with the profile of individual or are intended for commercial purpose. Therefore, the SBP has advised banks to ensure that the use of debit/ credit cards for international transactions is aligned with the profile of card holders and for their personal needs only.

It is emphasised that the purpose of debit/credit cards is to facilitate individuals in making payments for transactions that are of personal nature. The limits on these cards as well as payments through them, both domestic and international, should therefore be aligned with the profile of the card holder.

It shall be the responsibility of a customer to ensure that his/ her annual limit is not breached at any time. However, banks are required to monitor these limits on consolidated basis for each individual, according to the SBP.

As regards use of cards for cross border transactions for meeting legitimate business related needs, a framework for acquisition of digital services is already available at the foreign exchange manual, in terms of which entities intending to acquire digital services can designate a bank to use this facility as per respective limits defined in the said framework. Besides, a general framework for acquisition of services by firms and companies has been given at the foreign exchange manual, the SBP said.