State Bank relaxes conditions for investment abroad
The State Bank has allowed Pakistanis to make equity investments in India but investors need to take permission from the central bank before doing so.
The bank has now made it easier to make investments in countries that allow capital and profits to be repatriated to Pakistan. The expectations are that when Pakistanis will make investments abroad to make their subsidiaries, profits can be repatriated.
The amendment in the law has enabled startups, fintech and export companies.
In order to set up an investor or office abroad, it is essential that the records of individuals or institutions should be clean.
There should be no previous case of money laundering or terror financing against companies or individuals who want to make investments abroad.
The State Bank has allowed banks to remit funds abroad on behalf of export-oriented companies, up to 10% of their average annual export earnings from the last three calendar years, or $100,000, whichever is higher.
Banks have been allowed to remit $30,000 from the second year onwards, to meet the annual budgeted expenses of a representative office established or acquired abroad with an annual increase of 10% in expenses, subject to a valid justification.
Resident companies, especially startup firms already operating in Pakistan for not more than seven years, are allowed to form a holding company abroad to raise capital there.
Banks have been allowed to remit up to $10,000, for this purpose. The shareholders of a resident company can swap shares to mirror the shareholding of the local company in the holding company. The holding company is required to bring a majority of funds raised from abroad in Pakistan until the certain thresholds are met.
The State Bank has allowed banks to remit up to $25,000 in a year of an individual to invest in stocks abroad, among other relaxations.