In a major development, State Bank of Pakistan (SBP) has finally exempted Gwadar Free Zones from Foreign Exchange Policy Framework (FEPF), a significant move that will allow all companies working in Gwadar South Free Zone and Gwadar North Free Zone to directly convert RMB into Pakistan rupee eliminating the role of currency of dollar once for all.
Since the operationalization of Gwadar Free Zones in 2023, companies were unable to run RMB currency account and retain RMB currency, Gwadar Pro reported on Friday.
As per previous rules, they had to convert RMB into dollar and then into Pakistan Rupee. Owning to deduction on currency exchange rate, companies had to suffer financial loss.
Finally, on December 11, a high-level follow-up meeting chaired by Additional Secretary Ministry of Maritime revealed that under SBP’s order, Chinee companies and foreign companies in both Gwadar Free Zones are exempted from FEPF and they will be able to maintain special foreign currency accounts (SFCAs) with retainment of 50 percent earnings in foreign currency for trade payments and remittances. Senior representatives from State Bank of Pakistan,
Federal Bureau of Revenue, China Overseas Ports Holding Company, Gwadar Port Authority and Finance Division participated in the meeting.
Earlier in June this year, the federal government had proposed to Gwadar Free Zone Company (GFZC) to consider retention of 50% in Special Foreign Currency Accounts (SFCAs). GFZC had agreed to this proposal as a short-term solution. The committee explored other mechanisms to increase this retention policy from 50% to 100% to bring it in par with Export Processing Zones (SEZs).
The committee also proposed a comprehensive Act for Gwadar Free Zone to incorporate all regulations, incentives and exemptions in line with SEZ Act 2012. The federal government has already issued the GFZ Tax Rules in 2022. However, the said rules do not include the exemptions from Foreign Exchange Regulations Act of 1947.a
The committee plans to propose long-term solutions within a week. In the meanwhile, GFZC will consult legal advisory to identify particular amendments in FERA 1947.