SIFC in action to curb grey market resurgence

• Directs SBP chief to launch drive against using informal channels
• Asks FBR to devise a milestone-based action plan to digitise revenue machinery
ISLAMABAD: In the wake of the resurgence of the grey market, the Special Investment Facilitation Council (SIFC) has urged the State Bank of Pakistan (SBP) and Federal Board of Revenue (FBR) to enhance the flow of foreign exchange through official channels and secure remittances from overseas Pakistanis.
The top civil-military forum, created to promote investment, has also asked FBR to devise a milestone-based action plan for the digitalisation and restructuring of revenue machinery to reach a tax-to-GDP ratio of 18 per cent in five years by 2029 from the current stagnating rate of 8.5pc.
Official records seen by Dawn suggest that the SIFC has also decided to complete price deregulation of non-essential drugs and put in place a National Policy Framework for Nursing and Midwifery that would also envisage improving nursing skills through medical colleges.
These decisions were taken by the Executive Committee of the SIFC last month and have been conveyed to relevant stakeholders for implementation. According to the meeting minutes despatched to the ministries and divisions concerned, the SBP governor has been directed to review underlying factors about the flow of foreign exchange through informal channels and take corrective measures in collaboration with the FBR chairman and secretaries of finance and information.
In recent weeks, the grey currency market has reemerged after months of tight administrative and security measures that had almost wiped out illegal channels. As a result, there were reports of the grey market offering Rs284 to a dollar against less than Rs280 in the open market.
In this regard, the secretary of finance has also been asked to form a working group with the governor of SBP, the secretary of commerce, and the chairman of FBR to restore the Cash Over Counter Facility through National Bank of Pakistan branches and booths at border crossings after identifying underlying issues.
In collaboration with the Ministry of Information, the SBP chief was also asked to plan a nationwide campaign to discourage using informal channels and progress on profit repatriation with testimonials.
Simultaneously, the governor of SBP and the chief executive officer of the Public private Partnership Authority (P3A) were asked to conduct a third-party study to evaluate the present scenario of inflow and outflow of forex through both formal and informal channels.
The two were also directed to “explore effective mechanisms for securitisation of remittances” and develop recommendations for incentivising formal banking channels for the inflow and outflow of foreign exchange, particularly remittances. The SIFC also decided that the SBP, in consultation with banks and the Ministry of Finance, should work out a feasible future framework for currency stabilisation.
The SIFC has also asked the FBR chairman, the secretary of information technology and chiefs of the National Database and Registration Authority (Nadra) and Pakistan Revenue Automation Ltd (Pral) to speed up the restructuring and digitalisation of FBR, reconstitution of the federal policy board, separation of Customs and Inland Revenue Organisation, separation of policy functions from tax operations and collections and establishment of two separate oversight boards for customs and inland revenue.
The SIFC has also directed the secretaries of national health, industries, and production to advance the policy direction for the deregulation of non- and less-essential pharmaceutical products and medicines and devise viable options for separating the pricing function from the Drugs Regulatory Authority of Pakistan (Drap) in a manner that safeguards consumers’ rights and pharmaceutical companies’ business objectives. In doing so, the policy direction should also envisage a new structure for regulation and effective monitoring mechanisms with minimal government intervention.
It may be noted that the federal cabinet decided in February of this year to deregulate non-essential drugs following widespread complaints of price manipulations jointly by the industry and the regulator.
At the time, it was agreed that Drap or the relevant ministry should not be involved in the minimum pricing mechanism except for those in the National Essential Medicines List and let the free market take its course on non-essential medicines and biologicals.
The SIFC has also asked the Ministry of National Health Services and Research (MNHSR) to take on board the Ministry of Law and the provincial governments on a draft National Policy Framework for Nursing and Midwifery and submit a concept note to integrate and synergise Pakistan’s health sector ecosystem with SIFC and P3A. This will now be taken up again at the upcoming SIFC meeting.
The MNHSR must develop a workable plan to enhance nursing training by incorporating the infrastructure of medical colleges to cater to the rising demand for nurses abroad. The ministry must identify supply-side bottlenecks and suggest ways to enhance the generation of qualified and certified nursing staff for placement in the international market.
Published in Dawn, August 15th, 2024