A recent decision taken by Pakistan’s Civil Aviation Authority (CAA) making it mandatory for all international in-bound traveller to declare all the foreign currency in their possession, has contributed to the existing pressure on the Pakistani rupee (PKR), which is struggling against the US dollar.
The CAA’s decision came after the approval by the State Bank of Pakistan’s (SBP) FATF cell, taken without the knowledge of the Ministry of Finance and Revenue.
The critical decision by the the SBP and applied by the CAA was discussed in the Senate Standing Committee on Finance meeting, in which, National Directorate General of the Financial Action Task Force (FATF) had maneuvered the decision 12 days before the on-site visit of the FATF delegation.
And as the decision was brought into affect from August 16, the Ministry of Finance or the Federal Board of Revenue (FBR) was unaware of the decision.
The FATF delegation completed its on-site visit to Pakistan on September 2 as part of its final formalities to ensure that the country has complied with the action plan.
The FATF’s final report after the on-site visit will be paving the way to the country’s removal from the grey list.
The decision by SBP to have inbound international passengers declare all foreign currencies in their possession is to be completed through a declaration form, which will have to be filled by the passenger and handed over to the airline staff. The declaration form would show details of domestic and foreign currency in possession with the passenger.
“Recently, exchange companies complained that the CAA’s decision to make the currency declaration mandatory is also one of the reasons behind the rupee coming under pressure,” said Inayat Hussain, Deputy Governor of SBP.
“The passengers are now reluctant to bring in foreign currency,” highlighted Inayat Hussain.
But interestingly, such an important decision was taken without the knowledge or approval of the federal government offices on revenue and finance.
The revelations expose the inconsistency in decision-making and lack of coordination between state institutions and the central bank, which has taken the decision to comply with the requirements of FATF.
The SBP seems to be directly reporting to FATF and taking major decisions without even notifying the federal government and relevant ministries, something that should raise many eyebrows in the country.
While the decision to impose mandatory currency declaration was taken; SBP also took another decision to allow export of US currency, prompting about $7 million exported by exchange companies in Pakistan since 15 August 2022.
Pakistan’s economy is currently struggling to maintain what seems like a free fall of the Pakistani rupee against the US.
However, with central bank taking unanimous decisions without the consent of the relevant ministries; many questions have been raised on the control the federal government maintains over its own central bank and the exchange companies.