Pakistani court takes notice on transfer of $15.25bn abroad

ISLAMABAD: Pakistani individual account holders transferred a massive $15.25 billion abroad in fiscal year 2016-17, which economists say has adversely impacted the country’s economy, foreign exchange reserves and foreign exchange rate.
This huge transfer of money from Pakistan, though through normal banking channels, was revealed in a report submitted to the Supreme Court by a 12-member committee of experts headed by State Bank Governor Tariq Bajwa on Tuesday.
The Supreme Court on Friday has taken notice of illegal transfer of money from Pakistan to other countries by individuals who had neither disclosed the accounts they were maintaining in other countries nor paid taxes on the money in accordance with the law.
An eight-page written order released by the apex court revealed an outflow of $15.25 billion in the fiscal year 2016-17.
“The governmental indifference toward the unhindered outflows of valuable foreign exchange from the economic wealth and resources of the country encouraged by immunities from scrutiny and from taxation granted to foreign currency transfers abroad was depriving the exchequer of vital tax revenue,” the court said in its order on June 22, 2018.
“The $15.25 billion are said to have been transferred through official channels but this amount cannot be considered as official remittances paid in terms of any service or import,” Professor Dr. Athar Ahmed, senior economist, told Arab News.
He said the foreign exchange reserves of Pakistan had been falling and inflation increasing sharply due to the transfer of billions of dollars to other countries each year.
“The money transferred abroad through illegal channels is much higher than this documented transfer of the funds,” he said. “Unfortunately there are lacunae in our banking and financial systems which influential and wealthy people exploit in their favor.”
Ahmed said the agreements reached with foreign investors are heavily in favor of the businessmen as they are allowed 100 percent repatriation of their earnings in Pakistan.
“This results in low collection of taxes and little expansion of businesses in the country,” he said.
He suggested the government work against the franchise-culture of multinational companies to stop outflow of capital from the country, besides strengthening laws to keep a check on the overseas cash transfer.
“The $15.25 billion is an alarming figure as total foreign remittances of Pakistan stand around $18 billion per annum. It must be investigated further as to who and why sent this money abroad,” Muzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan, told Arab News.
He suggested the state bank devise a proper criterion for the transfer of funds from Pakistan to abroad to check the “illegal and unnecessary capital flight from the country.”
Aslam said that the successive governments have been getting foreign loans to run the country and they failed to do something concrete to check the capital flight which would have helped not only maintain the country’s foreign exchange reserves but also the foreign exchange rate.
“Our parliament and relevant institutions need to devise proper mechanisms to stop the transfer of funds abroad through both legal and illegal channels to bring stability in the economy,” he said.