Defective Fundamentals of Pakistan's Foreign Exchange Law - Need to Switch from Controls to Liberalization in Order to Achieve Prosperity in the Era of Digital Trade

Abstract

Pakistan currently has a foreign exchange controls regime in the shape of Foreign Exchange Regulation Act, 1947 (FERA’47). In my humble view, FERA’47 is faulty and needs to be replaced with a new law for effective liberalization of forex market in Pakistan. The basic object of FERA’47, as a legacy legislation of WWII, was to restrict outflow of foreign exchange. However, in current times, with rapid developments in the field of trade, commerce and communication and with modern technology the world itself has become a global village and no country can prosper in isolation of others. Presently there is an ongoing fierce competition among various developed countries to attract foreign investment for the purpose of development. In such a situation the importance of creating a liberal environment to encourage inflow of foreign currency cannot be under stated. This article has been structured in seven parts as below. The first serves as the introduction to subject matter of this article; the second part provides a brief historical background leading to enactment of FERA’47; the third part identifies the current nature of FERA’47 as an offence creating penal statute that is not compatible to current global digital trade; the fourth part notes the dilemma as to halfhearted liberalization measures during the period of 1990s and 2000s; the fifth part brings home the point that liberalization is the need of the hour; the sixth part highlights the essential recommendations for forex liberalization; and the final seventh part serves as the conclusion to this article.