November 11, 2008	Tuesday	Ziqa'ad 12, 1429

KARACHI, Nov 10: The State Bank suspended on Monday the licence of the Khanani and Kalia foreign exchange company after the arrest of its owners on charges of illegally transferring billions of dollars abroad.

The licence of the firm, Khanani and Kalia International, was suspended for 30 days for violating rules and regulations and its head office, branches, franchises, payment booths and currency exchange booths were debarred from undertaking any business during the period.

While the pictures on media of a handcuffed Munaf Kalia, one of the owners of the company, unnerved others in the business, the exchange rate remained unaffected.

The government alleges that the company was involved in physical export of foreign exchange and the Federal Investigation Agency says it has evidence to prove the allegation.Nervous owners of most of the exchange companies were unwilling to discuss the issue with the media.

However, the president of the Forex Association of Pakistan, Malik Bostan, said the action against the country’s biggest exchange company would hurt remittances from overseas Pakistanis which were expected to reach $7 billion by the end of June 2009. Hundreds of thousands of dollars of overseas Pakistanis were to land in Pakistan through the company.

Mr Bostan said the State Bank should help resolve the issue of such remittances.

“Most of the remittances of overseas Pakistanis are coming through the exchange companies because their charges are lower than those of banks. The action has shattered the confidence of overseas Pakistanis in all exchange companies,” he said.

Pakistan received record remittances of about $6.5 billion during 2007-8 from overseas workers, enabling the country to meet at least 50 per cent of the record current account deficit.

Remittances during the first quarter of the current fiscal year showed a 24 per cent growth, the only thing to move in favour of the economy.

“We have offered to provide $500 million each month to the government but our offer has been ignored without giving any reason,” Mr Bostan said.

The government has failed to get help from its closest friends, like Saudi Arabia and China, and has been forced to seek an IMF loan that would certainly slow down the economy and produce massive unemployment.

Mr Bostan said the Forex Association and exchange companies of both A and B categories would hold a meeting on Friday to discus the situation and reiterate their offer to the government and the State Bank.

The exchange companies were shocked over the raid conducted by the FIA without taking the State Bank into confidence. “We have been assured by the FIA that no further action will be taken against any exchange company without informing the State Bank,” said Mr Bostan.

The terrified currency market was abuzz with rumours about involvement of some political elements but it remained clueless about the real reason behind the sudden FIA crackdown.

Not a single currency dealer was ready to accept the allegation that $10 billion had been exported illegally.

A State Bank circular observed that despite reiterating the commitment to strictly comply with the SBP rules and regulations, the level of compliance on certain occasions was found to be unsatisfactory.

“This state of affairs has been viewed very seriously and the exchange companies, in their own interest, are advised to maintain their compliance status to the requisite levels.”

“It is reiterated that in case any exchange company is found involved in any violation of SBP rules and regulations in general and any undocumented transactions in particular, strict action leading towards suspension or cancellation of the licence will be taken against the company involved,” the SBP warned.