Government of Pakistan has over the years gradually liberalized the Foreign Exchange Regime in Pakistan with the objective of implementing free float Exchange Rate Mechanism (ERM). From a fixed rate mechanism of the early nineties, the country has moved toward liberalization of the foreign exchange markets.
Resident Pakistanis are allowed to open foreign currency accounts, foreigners are allowed free movement of capital and funds in and out of the country, Special Convertible Rupee Accounts (SCRA) introduced in 1992 allow easy access to the capital markets in Pakistan from anywhere in the world. Although certain restrictions remain on current account transactions, today the exchange rate is determined by market mechanism and banks are allowed to provide forward cover to exporters and importers.
The participants in the foreign exchange market in Pakistan include the State Bank of Pakistan, Commercial Banks (Authorized Dealers), Corporate Treasuries, Public Sector, Interbank brokerages houses, resident and non-resident Pakistanis, Exchange Companies and Money Changers. The SBP, however, has imposed foreign exchange limits on banks based on their paid-up capital.