My position on Pakistan's foreign currency account problem after looking at the evidence
By Asad Baig · Lahore · May 2026 · Approx. 18-min read
Why I am writing this
My name is Asad Baig.
I am not an economist. I am not a banker. I am not a regulator, an industry insider, or a government adviser. I am a Pakistani who runs an IT company. I earn US dollars from foreign clients. I pay taxes in Pakistan. I employ Pakistanis. I want to bring my earnings home to Pakistan. And one day I sat down to ask a simple question.
I asked: can my company have a USD account?
The answer to that question, it turned out, was not simple. The answer required understanding seventy-six years of Pakistani political economy, three constitutional crises, multiple IMF programmes, and the specific design choices made by Pakistan's elite to maintain a system that serves their interests at the expense of mine. The answer required understanding why a Pakistani importer can move dollars out of the country with a phone call, while a Pakistani exporter has to argue with a branch officer for documentation that varies by mood. The answer required understanding why the same government that protects offshore wealth flight through Section 111(4) of the Income Tax Ordinance simultaneously cites "money laundering concerns" when it refuses to let me hold my own legitimately earned dollars.
So I wrote a position paper called The Foreign Currency Account Problem in Pakistan. I wrote a longer book called The Foreign Currency Account Question in Pakistan: A Forensic Investigation, 1947 to 2026. And I am writing this article because every Pakistani IT entrepreneur, every freelancer, every exporter, every overseas worker sending remittances home has a right to know, in plain language, what I have come to believe about this system, and why.
This is not a neutral piece. I will not pretend it is. I am angry on behalf of every Pakistani who has been told for thirty-three years that restrictions on holding foreign currency exist for their protection, while watching the same government quietly maintain the legal corridor through which the elite has moved hundreds of billions of dollars offshore. But I have tried to be fair. I have tried to understand the constraints the State Bank of Pakistan faces. I have tried to see the reform attempts that succeeded and the ones that failed.
Even after seeing all of that, what they have built is wrong. And we have a right to know.
The number that should make you angry
The current foreign currency framework destroys approximately twenty-five to thirty-six billion dollars of Pakistani value every single year.
Try to imagine that. It is hard, because the number is too big to feel real. Let me put it in things you can picture.
Twenty-five to thirty-six billion dollars a year is more than Pakistan's entire foreign exchange reserves of $21.79 billion as of March 2026. It is more than Pakistan receives in any IMF Extended Fund Facility programme. It is approximately equal to one-third of Pakistan's annual import bill. The cumulative cost over a single decade is larger than Pakistan's entire external debt of $130 billion.
This is what I mean when I say the current system is a wealth-extraction architecture, not a banking system. Read that line again. I want it to sit with you for a moment.
The number breaks down something like this. Pakistani IT companies and freelancers lose between $0.8 billion and $1.8 billion every year to forced conversions, transaction fees, multiple-step conversion losses, and the cost of maintaining offshore structures because the formal banking system does not serve them. Goods exporters lose another $1.1 billion to $2.4 billion to operational inefficiency, working-capital optimisation losses, and offshore subsidiary maintenance. The Pakistani working class, who never opens a foreign currency account in their lives, pays an inflation premium of $6 billion to $10 billion a year because the rupee is structurally weak in part because productive earners route their earnings through Wyoming and Dubai instead of Pakistani banks. The diaspora loses $1 billion to $2 billion to suboptimal banking products. The state itself loses $2 billion to $4 billion a year to higher borrowing costs and IMF programme dependence that this same system perpetuates.
If you find these numbers hard to believe, I understand. I found them hard to believe too. They are documented, with methodology, in the longer investigation. Each component is sourced.
Here is the part that should make you angrier still. The total annual stake of the people who benefit from this system is approximately $8 billion to $21 billion. The total annual cost to the people who lose under this system is approximately $11 billion to $20 billion. Those numbers are roughly equal. The country itself is not gaining anything from this arrangement. Pakistan is not made richer by the system. Pakistan is approximately neutral or net negative on the entire transaction.
WHAT THIS MEANS FOR YOU
This is not a system that benefits Pakistan and harms one group. It is a system that transfers value from one group of Pakistanis to another, with the country itself losing some friction in the process. When you pay a 25 to 30 percent premium on Facebook ads through a Pakistani bank card, that money is not going to "the country". It is going to the bank that processed the transaction, the federal government tax accumulator, and the elite arbitrage that benefits when the rupee weakens against their offshore dollar holdings. None of it is going to anything you would call public benefit.
The mathematics are unforgiving. Approximately two hundred thousand organised winners benefit at the expense of one hundred and sixty-five million Pakistanis. That is a ratio of eight hundred and twenty-five losers for every winner. Yet the system persists. Why? Because the two hundred thousand are organised, politically connected, and institutionally embedded. The one hundred and sixty-five million are atomised, individually frustrated, and have not yet recognised themselves as a class with a shared interest.
That last sentence is the entire story.
The 50 percent retention rule is theatre, not reform
In October 2023, the State Bank of Pakistan issued EPD Circular Letter No. 17. It raised the retention rate for IT exporters in the Exporters Special Foreign Currency Account from 35 percent to 50 percent. P@SHA welcomed it. The press described it as a major reform. The government took credit for listening to the industry.
I will tell you what I see when I look at this so-called reform.
I am told I may "keep" 50 percent of my earnings in an ESFCA. I cannot withdraw cash USD from this account. I cannot use it to pay for personal travel. I cannot use it for anything that is not pre-approved as a foreign payment with documentation that varies by branch officer. The dollars that supposedly belong to me are bookkeeping entries, not money. They exist on a bank statement. They do not exist as something I can spend the way a Pakistani importer can spend dollars to buy machinery from Germany.
A Pakistani importer, by contrast, can convert PKR to USD at the bank, open a Letter of Credit, and pay a foreign supplier. The process is functionally identical to what an exporter supposedly receives as a privilege under the 50 percent retention rule, except the importer can do it freely without the documentation theatre and without the 50 percent forced conversion that I face on the other half of my earnings.
So what exactly did the 2023 reform reform?
It reformed the marketing. It allowed P@SHA to claim victory. It allowed the government to claim responsiveness. It allowed news outlets to report progress. The lived experience of a Pakistani IT entrepreneur is substantially unchanged. I still have to convert at least half my earnings to PKR upon receipt at whatever rate the official desk offers. I still cannot withdraw cash USD. I still cannot fund a personal trip to Dubai for a client meeting from my own retained dollars without a separate bureaucratic process. I still face an effective 25 to 30 percent premium on every international card transaction.
This is the pattern across every "reform" of the past decade. Form R requirements eliminated in April 2026. Same-day processing. Single declaration at account opening. Each of these is real. None of them touches the fundamental restriction. The fundamental restriction is that productive Pakistanis cannot freely use their own foreign-source earnings.
I do not accept that this constitutes reform. I want this on record. The State Bank of Pakistan, P@SHA, and the federal government can call it whatever they want. The lived experience of the productive class has not changed. The offshore migration of Pakistani IT entrepreneurs has not slowed. The 30 to 60 percent of actual Pakistani IT earnings that never appears in official statistics, because it is held in Wyoming or Estonian or UAE accounts, has not been brought home.
The system is built for importers, not exporters
This is the most economically irrational feature of Pakistani banking, and it has not been corrected in seventy-six years.
Exporters bring foreign currency into Pakistan. Importers send it out. A reserve-strapped country with chronic balance-of-payments crises should facilitate the first and discipline the second. Pakistan does the opposite.
Importers receive smooth Letter of Credit processing. They have dedicated trade finance teams. They get predictable timelines. They have well-trained branch officers. The major banks compete for their business. The State Bank of Pakistan moves quickly when import LCs are at stake during reserves crises, even prioritising specific categories of imports.
Exporters receive documentation friction. They face suspicious-treatment KYC. They get unpredictable processing. The branch officer they happen to meet decides whether their export proceeds clear the same day or sit in limbo for two weeks. They navigate Form R requirements, EPD circular changes, retention rule adjustments, and the constant possibility that the rules will tighten in the next reserves crisis.
This asymmetry is not accidental. It reflects whose political power built the Pakistani banking system. Pakistan's textile barons, the families that own the import-substitution industries, the politically connected industrialists whose business model depends on machinery imports paid in dollars and final products sold in rupees in a captive domestic market, these are the people whose interests shaped the banking architecture. The exporter is a relatively recent constituency. The IT exporter is a very recent constituency. The freelancer is a constituency that did not exist when this system was designed and is still not adequately represented in the bodies that design banking policy.
When I read the SBP Foreign Exchange Manual, I see this asymmetry in the structure of the chapters. Imports get detailed operational guidance. Exports get operational guidance plus an additional layer of conditions, declarations, and discretionary approvals.
This is not the framework of a country that wants to maximise dollar inflows. This is the framework of a country whose ruling class accumulated wealth through import-substitution and protected its position by ensuring that the rules continued to favour that mode of accumulation, even after the world had moved on to services and digital exports.
I am a Pakistani IT exporter. The system was not designed with me in mind. After thirty-three years of failed reform attempts, it is still not designed with me in mind. This is not my emotion. This is also experience.
The "currency would crash" argument is a deception
Every time meaningful reform of the foreign currency framework is proposed, the same warning appears. If Pakistanis can hold dollars freely, the rupee will collapse. The State Bank will lose control of monetary policy. Capital flight will accelerate. Reserves will drain. Hyperinflation will follow. This warning is delivered with great seriousness by people in suits on television.
I have come to believe this argument is a deception. I will explain why.
The argument applies to a different reform than the one I am proposing.
The argument applies if you imagine a scenario in which any Pakistani citizen can walk into a branch, convert PKR to USD freely with no source verification, deposit those dollars in a foreign currency account with no inquiry, and either hold them or wire them abroad. That was, broadly, the framework that the Protection of Economic Reforms Act 1992 created. It collapsed in May 1998, exactly as the critics of that framework predicted, because it allowed PKR-denominated black money to be converted into USD-denominated bookkeeping entries that the State Bank had agreed to honour but did not actually have the dollars to back.
That is not the reform I am proposing. The reform I am proposing is for verified foreign earners to hold their foreign-source earnings. Money that is already in USD before it enters the Pakistani banking system. Money that arrives via Stripe, PayPal, Wise, Payoneer, or a wire from a documented foreign client. This reform creates dollar supply for Pakistan, not dollar demand. It does not authorise PKR-to-USD conversion. It authorises USD-to-USD passage through the Pakistani banking system without forced conversion.
Under the reform I am proposing, the rupee would strengthen, not weaken. More dollars would arrive through formal channels. Fewer would be diverted through offshore structures. The thousands of Pakistani IT companies that currently route earnings through Wyoming LLCs would have a reason to repatriate to a Pakistani account. The 30 to 60 percent of actual IT earnings that never appears in Pakistani statistics would start appearing.
The "currency will crash" argument is used against this reform because it is effective at stopping conversation. It is not used because it is true. When you hear it, you should ask the person making it a specific question. Are you saying the rupee will crash if more dollars enter Pakistan? Because that is the opposite of what every textbook predicts.
The people who use this argument are protecting the existing structure, in which the rupee is structurally weak because productive Pakistanis cannot hold dollars onshore and therefore route them through Dubai or Estonia. The structural weakness suits the elite holders of offshore USD wealth, who watch their PKR-equivalent appreciate by 5 to 15 percent annually as the rupee depreciates. That appreciation, multiplied across $100 to $150 billion in offshore Pakistani holdings, is a transfer of $5 billion to $15 billion a year from rupee-holders to dollar-holders. From the working class to the elite.
I do not accept the currency crash argument. Anyone who continues to make this specific argument against this specific reform is either uninformed about how dollar supply affects exchange rates, or dishonest about which interest they are protecting. There is no third option.
The "money laundering" justification is hypocritical
This is the part that, when I first understood it, made me angriest.
Pakistan maintains the Anti-Money Laundering Act 2010 and the Protection of Economic Reforms Act 1992 simultaneously. These laws directly contradict each other. PERA Section 5 explicitly prohibits inquiry into the source of foreign currency deposits. Income Tax Ordinance Section 111(4) makes inward remittances tax-immune regardless of source. Together, these provisions create a legal corridor through which Pakistani black money has been laundered for thirty-three years. A 2018 legal analysis published in Pakistani academic journals concluded that "the objective of the AMLA to prevent money laundering is clearly defeated with the existing provisions of the PERA contained in sections 4, 5, and 9 of the PERA". This is not my interpretation. This is the published legal analysis.
In rough terms, the round-trip works like this. A Pakistani industrialist with PKR-denominated black money sends it abroad through trade mis-invoicing or hawala. It arrives in Dubai or London as USD. The same industrialist then "remits" some portion of it back to Pakistan through formal banking channels. Section 111(4) makes the remittance tax-immune. PERA Section 5 prohibits inquiry into the source. The money is now whitewashed. Pakistani statistics count it as a remittance, sometimes as foreign investment if it is routed through a Dubai shell company. The same money is counted multiple times in different categories, and at no point does any Pakistani institution have the legal authority to ask where it actually came from.
A 2013 statement by then-SBP Governor Yaseen Anwar acknowledged that approximately $9 billion is illegally remitted out of Pakistan annually. A 2018 tax compliance analysis estimated that approximately one-fifth of $19 billion in annual remittances, or roughly $3.8 billion a year, is domestically generated black money being whitewashed under Section 111(4). These are figures from Pakistani sources. The State Bank's own governor said one of them on the record.
Now hold this picture in your head. The same government that maintains this legal corridor for elite black money laundering simultaneously cites "money laundering concerns" as the reason it refuses to let an IT entrepreneur with a PSEB registration, a tax filer status, and a documented foreign client invoice hold his own legitimately earned dollars in a Pakistani bank account.
The laundering happens through elite channels that remain protected. The restrictions fall on productive citizens who have nothing to launder. This is what I mean by hypocrisy. It is not a strong word in this context. It is the precise description.
When a regulator tells me that source verification, KYC, and tax filer linkage are necessary for me to hold my own foreign earnings, I do not disagree with the principle. I support source verification. I support KYC. I am a tax filer. I have nothing to hide. What I object to is being asked to undergo verification that the actual money launderers are, by statute, exempted from. At what cost? At what cost they don't know or don't care.
The reform I am proposing, the Productive Capital Account, requires source verification more strictly than the current PERA framework. Every deposit must arrive with a wire transfer record, foreign client invoice, platform earnings statement, or foreign employer payslip. FATF-compliant, mandatory, no exceptions. The reform I am proposing does not weaken anti-money-laundering controls. It applies them honestly to the people who can be verified, while withdrawing the elite's special exemptions from them.
If the reaction to this reform from the people currently citing "money laundering" turns out to be opposition, you will have learned everything you need to know about whose interests the current framework actually protects.
The IMF and FATF are not the obstacles
A separate version of the "we cannot reform" argument is that international institutions would not allow it. The IMF would object. FATF would impose new conditions. Pakistan would lose its programme, fall onto the grey list, find correspondent banking relationships disrupted, face international isolation.
This argument has the same shape as the currency crash argument. It is delivered with great seriousness. It is not actually true.
Singapore is FATF-compliant. So is the United Arab Emirates. So is India. So is Malaysia. So is Bangladesh. Every one of these countries operates a substantially more liberal foreign currency framework for its productive citizens than Pakistan does. India runs IMF-compliant programmes alongside a comprehensive resident foreign currency framework. Bangladesh, with comparable political and economic constraints to Pakistan, allows its IT exporters and resident professionals access to foreign currency holdings that Pakistani equivalents cannot dream of.
If FATF compliance and IMF programmes were actually incompatible with productive-class FCY access, none of these five countries would have what they have. They have it. The constraint is not external. The constraint is domestic. Pakistani policymakers blame foreigners because doing so deflects accountability for their own choices. It is easier to say "the IMF will not allow it" than to say "the bankers and bureaucrats and politicians who designed this system want it to remain this way."
The FATF grey list episode of 2018 to 2022 is illuminating here. When Pakistan was on the grey list, the country implemented genuine compliance reforms under external pressure. Source verification tightened. Beneficial ownership disclosure improved. KYC requirements became more rigorous. These reforms hit productive small users hard. They did not hit the elite, whose wealth was already offshore. The reforms that would have hit elite wealth, like comprehensive offshore disclosure, beneficial ownership transparency that crossed jurisdictional lines, and serious enforcement against trade mis-invoicing, were implemented superficially. Pakistan came off the grey list in October 2022. Several reforms began being quietly de-emphasised. The pattern was clear. Pakistan implements compliance reforms when forced. Pakistan resists structural reforms that would expose its own elite. FATF was not the obstacle to comprehensive reform. The Pakistani political economy was the obstacle.
I want to be specific about one thing. International institutions can be allies of reform if Pakistani reformers actually want their help. The IMF would prefer Pakistan to have a stable, productive foreign currency framework that brings dollars onshore and reduces dependence on its programmes. FATF would prefer Pakistan to have honest enforcement that targets actual money laundering rather than burdensome KYC on small users. The international institutions are not the enemies of productive-class reform. They are sometimes the convenient excuse for not pursuing it.
The 1998 freeze is a wound that has never healed
To understand why Pakistanis do not trust foreign currency accounts, you have to understand what happened on May 28, 1998.
On that day, Pakistan conducted its nuclear tests in Chagai. The same day, the government froze all foreign currency accounts in the country. Account holders were told they could withdraw only PKR, at a government-fixed conversion rate of Rs 46 per USD, which was below the market rate. People who had deposited fifty thousand dollars found they could only withdraw rupees that would buy them maybe forty thousand dollars at black-market rates. Foreign banks shut their Pakistani operations. Reserves collapsed from $1.3 billion to $440 million within months. Pakistan was technically bankrupt. Average depositors lost 15 to 20 percent of their wealth instantly. Subsequent rupee depreciation pushed those losses to 30 to 40 percent. Ten years later, those who had been forced to convert had effectively lost half their wealth.
The freeze betrayed every protection PERA 1992 had statutorily guaranteed. PERA had explicitly promised no restriction on holding foreign currency, no restriction on withdrawal, no restriction on transfer abroad, and statutory protection from future government interference. All four were violated overnight. By the same government that had passed the Act.
This breach has never been formally addressed. There has been no official acknowledgement. No compensation. No prosecution. No structural protection against repetition. The wound remains open, and every Pakistani who is old enough to remember 1998 carries a quiet certainty that the state will, when sufficiently pressured, prefer international creditors and elite extraction over the small depositors who actually trusted it.
The most painful part of the 1998 story is who lost. The elite, the industrial families, the senior politicians, the wealthy traders with Dubai connections, had been moving money out for years through PERA's legal channels. By the time of the freeze, they were largely protected. The accounts that got frozen disproportionately belonged to working-class overseas Pakistanis who sent remittances home, small business owners with legitimate FCY savings, retirees who had saved in dollars, middle-class families with documented foreign income, and honest depositors who had believed the "no restrictions" promise.
These were exactly the people the marketing of PERA had claimed to be helping. They were the ones who paid the price when the architecture collapsed.
I think about 1998 often when I think about reform. The fear that any new framework would be frozen the next time reserves drop is not paranoia. It is a memory backed by experience. This is why the reform I propose includes specific safeguards against the conditions that made 1998 possible. The reform I propose does not authorise PKR-to-USD conversion, so there is no liability mismatch the State Bank cannot honour in a crisis. The reform I propose accepts only foreign-source dollars, which means the bank's USD assets actually exist as USD, not as bookkeeping entries denominated in USD that are actually backed by PKR-denominated convertible balances. The 1998 mechanism cannot repeat under this design.
I also believe Pakistan owes its 1998 depositors an honest accounting. Not necessarily compensation thirty years later. But an acknowledgement. A statement of what happened. A statement of why. A statement of the institutional protections being put in place to prevent repetition. The wound stays open partly because the country has refused to look at it.
A VIGNETTE TO REMEMBER
Imagine you are a 62-year-old retired schoolteacher in Karachi in May 1998. You spent thirty years saving foreign currency, sent home by your son working in Saudi Arabia, in a foreign currency account at your local branch. Twenty thousand dollars. Your son's wedding fund. Your medical fund. Your security against the next crisis. On May 28, 1998, the bank tells you the account is frozen. You can withdraw rupees at Rs 46 per USD, below market. You take the rupees because you have no choice. The rupee depreciates. Your son's wedding fund is now worth ten thousand dollars. You did nothing wrong. You trusted the law. The law betrayed you. And no one has ever apologised. This is who paid for 1998. This is the trust that has not been rebuilt. This is the country we have to do better for.
The Roshan Digital Account proves reform is possible
Against the dark arc of Pakistan's foreign currency history, one product stands out as a counter-example. The Roshan Digital Account, launched in September 2020, has accumulated $12.426 billion in cumulative inflows across 917,400 accounts in 175 countries by March 2026. It survived the near-default crisis of January 2023, when Pakistani reserves dropped below $3 billion and import cover fell to less than three weeks. RDA accounts were never frozen. Repatriations continued normally. No new restrictions were imposed. The government publicly committed to honour obligations. Trust held.
This matters for one reason. The RDA proves that Pakistani reform is technically possible when there is political will. Digital infrastructure works in Pakistan when properly designed. NADRA verification eliminated branch visits. Mobile banking provided ongoing access. Investment products integrated directly. Trust was rebuilt by consistent honouring of commitments through a real crisis.
The question I keep asking is, why has this approach not been extended? If Pakistan can design a digital, low-friction, trust-building, crisis-resilient FCY product for overseas Pakistanis, why has it not been extended to IT companies and freelancers? Why has it not been extended to goods and service exporters? Why has it not been extended to tax-filing residents with foreign-source income?
The answer, I have come to believe, is that the RDA was specifically designed to bring offshore diaspora wealth back to Pakistan. The diaspora is a politically powerful constituency, economically valuable to the country in the form of remittances, and has not historically threatened domestic elite accumulation. Bringing diaspora wealth onshore is, from the elite's perspective, a net positive. It is dollars they did not have access to before, and it does not weaken any of the structures they care about.
Bringing IT exporter wealth onshore is different. It would require dismantling the forced-conversion mechanism that generates billions in bank fees. It would require letting productive Pakistanis hold the kind of wealth that has historically been the exclusive domain of the elite. It would change the class structure of who has access to dollars in Pakistan. The elite did not build the current system to share that access.
The RDA is therefore proof of two things at once. It proves that reform is technically and operationally possible. It also proves that reform happens only when it is politically aligned with elite interests. The reform I am proposing is not aligned with elite interests. That is the entire problem.
The Productive Capital Account: my proposal
I am not asking Pakistan to invent anything. The framework I am proposing already exists in five comparable countries. The proposal is to adopt it, adapted to Pakistani circumstances and protected against the specific abuses that destroyed PERA 1992.
I call it the Productive Capital Account. The eligibility list includes IT companies and software houses with PSEB registration, freelancers with verified platform earnings, goods exporters with documented export history, service exporters in BPO, consulting, education and telemedicine, importers operating documented businesses, resident professionals with foreign-source income, and overseas Pakistanis through an expansion of the existing RDA framework.
The five non-negotiable safeguards that distinguish this from PERA 1992 are these.
First, no PKR-to-USD conversion is permitted for deposits. Only foreign-source dollars qualify. This single rule eliminates the laundering pump that destroyed PERA. The black-money round-trip described earlier becomes mechanically impossible. There is no way to convert PKR black money into PCA dollars, because the PCA does not accept PKR conversions at all.
Second, mandatory source verification on every deposit. Wire transfer record, foreign client invoice, platform earnings statement, or foreign employer payslip required. FATF-compliant. Stricter than the current PERA framework, which prohibits inquiry into source.
Third, tax filer status required for residents. Active Taxpayer List membership and consistent annual filings. Foreign income declared. The PCA is not a tax shelter. It is an operational banking framework for tax-compliant productive earners.
Fourth, beneficial ownership transparency. Ultimate owners declared at account opening, updated on changes, cross-checked with the corporate registry. Pakistan's beneficial-ownership infrastructure already exists at NADRA and FBR. The PCA leverages it.
Fifth, caps based on verified income. Tiered limits prevent excessive accumulation by any single entity while permitting productive operations. A freelancer earning $5,000 a month and an IT company earning $500,000 a month both have appropriate, documented limits relative to their actual earnings.
What the account holder receives is what every productive Pakistani has been quietly building for themselves through Wyoming LLCs and Dubai free zone companies for the past decade. Genuine multi-currency banking in USD, EUR, GBP, SAR, AED, CAD, AUD, SGD, JPY, CNY. Free use of these dollars for foreign payments, no per-transaction approval theatre. International debit card at normal global rates, no 25 to 30 percent Pakistani markup. Direct integration with Stripe, PayPal, Wise, Payoneer. Cash withdrawal for legitimate travel needs, with reasonable limits. Free conversion to PKR at market rates whenever the holder chooses. Market interest on USD deposits. Elimination of FED, SST, and advance tax on PCA transactions.
The projected five-year benefit to Pakistan from this single reform is approximately $125 billion to $180 billion. More than Pakistan's current external debt. More than 50 percent of current GDP. The benefit comes from additional reserves of $25 billion to $35 billion, reduced debt-service costs from currency strengthening of approximately $25 billion, reduced borrowing costs from a lower risk premium of $15 billion to $20 billion, avoided IMF programme costs of $10 billion to $15 billion, household inflation savings of $20 billion to $25 billion, and indirect gains from FDI, formalisation, and retained talent of $30 billion to $60 billion. These are projections, not predictions. They depend on implementation quality. But the order of magnitude is clear.
This is not a radical proposal. The radical thing is Pakistan's continued refusal to do what its peers have done for decades.
Why reform has not happened, and how it could
The technical case for reform is overwhelming. The economic case is clear. The international precedent is established. Yet the system persists. I want to be honest about why.
The system persists because approximately two hundred thousand organised beneficiaries earn $8 billion to $21 billion annually from the current arrangement, and they are politically powerful, economically integrated, and institutionally embedded. Pakistani banks that profit from forced conversions sit on the boards of the regulators who write the rules. Politicians who hold offshore wealth design the laws that govern offshore wealth. Bureaucrats who exercise discretionary approval rents draft the procedures that require discretionary approval. The architecture defends itself, because the people in a position to change it are also the people who benefit from it.
The one hundred and sixty-five million potential beneficiaries of reform are not organised. They suffer individually. They blame various scapegoats. They develop individual workarounds, a Wyoming LLC here, a Wise account there, a UAE subsidiary somewhere else. Each workaround is a small victory for the system. Economic activity continues. The productive class is constrained but not desperate. The status quo persists.
The system depends on individual frustration not becoming collective action. The day it does, the math changes.
I do not want to romanticise this. Collective political action by the productive class against a politically organised elite is hard. It has not happened in Pakistan in seventy-six years. There is no guarantee it will happen now. The honest answer to "when will reform happen" is "when the productive class decides to make it happen, by organising itself politically with the same seriousness that the beneficiaries of the current system bring to defending it."
Eight specific things would change the math. Awareness, articulated publicly and persistently, of how FCY policy connects to banking profits, to currency weakness, to inflation, to elite wealth flight. Organisation through P@SHA, FPCCI, KCCI, LCCI, with cross-sector coalitions across IT, textiles, freelancers, goods exporters. Political engagement that makes banking policy a campaign issue across party lines, with reform-minded candidates supported regardless of partisan affiliation. Demands for transparency on bank profit sources, FCY restriction beneficiaries, and politician offshore assets. Use of media platforms, including blog series like this one, to fill the information vacuum that protects the system. Documentation of personal experience. International voices from the diaspora, advocating from positions of greater safety and credibility than domestic critics enjoy. And persistence. Reform of entrenched systems takes time. The first generation of advocates may not see victory. They begin the work anyway.
No party gets a pass on this
When I started this investigation, I was prepared to find that one political party was responsible. That would have been a simpler story. By the end, I had found something more uncomfortable. Every major political force in Pakistan has been complicit in maintaining the foreign currency extraction architecture, in different ways, at different times.
The PPP, under Zulfikar Ali Bhutto, nationalised the banks in 1972 to 1974 and tightened FCY restrictions to historic severity. This produced the era of peak hawala dominance, when 60 to 80 percent of Pakistani remittances moved outside formal channels. The PPP did not invent the bifurcation between elite and ordinary access. It deepened it.
The PML-N, under Nawaz Sharif's first government, passed the Protection of Economic Reforms Act 1992. PERA was the most consequential FCY legislation in Pakistani history, and it was the most damaging. It legalised the round-tripping of black money. It created the conditions for the 1998 catastrophe. The cost to Pakistan from PERA over its seven-year operational life is estimated at $11 billion to $21 billion in cumulative capital flight. Nawaz Sharif's second government then froze the accounts in May 1998, betraying every protection PERA had statutorily promised.
The Musharraf government, from 1999 to 2007, presided over the cautious normalisation that followed the 1998 freeze. It accepted the post-9/11 reserves boom as if it were structural rather than geopolitical. It did not use the breathing room to build a sustainable productive-class FCY framework. It rebuilt the same system, with marginal adjustments, that had collapsed.
The PPP government from 2008 to 2013, the PML-N government from 2013 to 2018, the PTI government from 2018 to 2022, and the current PML-N government from 2024 onwards have each, in their turn, preserved the fundamental architecture. Each has implemented incremental tightening on small users while leaving the elite extraction channels substantially intact. Each has cited "reform" without delivering structural change.
I am not interested in tribal political loyalties on this issue. The next election will produce another government from the same political class. That government will have the same opportunity to fix the system. Whether it does or not is what matters. Not which party it represents.
Citizens who treat this issue as partisan are letting themselves be played. The system has survived because its beneficiaries have made sure that no party can be blamed in isolation, and therefore none can be effectively challenged. The only way out is to make foreign currency reform a non-partisan demand on every political force, regardless of which one currently holds power.
What productive Pakistanis must do
I have spent a long time on this question, and I keep returning to the same conclusion. This is not a problem that policy papers solve. It is a problem that political organisation solves.
If you are a Pakistani IT entrepreneur, freelancer, exporter, importer, or resident professional reading this, here is what I believe matters. Forward this article to ten people in your industry. Discuss it with the founders WhatsApp groups you belong to. Bring it up at P@SHA events. Write your own version of these arguments in your own words. Share your personal experience publicly. The forty-six rupee per USD freeze of 1998. The $35,000 deduction for $100 of Facebook ads. The seven-week documentation friction that delayed your last payment. The Wyoming LLC you finally set up because the Pakistani system would not serve you. These specific stories make abstract policy real for people who do not live this experience.
If you are a Pakistani working class reader or salaried professional, the connection between FCY policy and your daily life is not obvious, but it is direct. The inflation you pay every month at the kiryana store is partly produced by the rupee weakness that the current FCY framework structurally maintains. The capital flight that this system enables is the reason your country borrows from the IMF instead of investing in domestic infrastructure. The bank fees you pay are higher because banks earn 30 to 40 percent of their profits from FCY restriction-related spreads.
If you are a member of the diaspora reading this, you have particular leverage. You can advocate from outside Pakistan with a safety that domestic critics do not have. You can use your platform with foreign journalists, your standing in your professional networks abroad, your visibility on international forums, to put pressure on the Pakistani policy conversation that domestic actors cannot. The RDA exists because the diaspora is politically powerful. That same power can be used to demand a Productive Capital Account for the productive class still onshore.
Most importantly, none of us should accept the framing that "the experts know best" or that "the SBP has thought about this carefully" or that "international institutions are the constraint". The experts have had thirty-three years. They have not solved it. The constraint is not international. The constraint is the political organisation of two hundred thousand beneficiaries against the dispersed interests of one hundred and sixty-five million potential reformers. The math changes only when the dispersed organise.
WHAT YOU CAN DO TODAY
Forward this article to ten people in your professional network. Discuss it at your next industry meeting. Write to your MNA and ask their position on the Productive Capital Account proposal. Tag P@SHA, FPCCI, KCCI, or LCCI when you post about FCY restrictions on social media. Make the basic facts of this system common knowledge. The system survives on opacity. Information is the first weapon, and it is in our hands.
In closing
These are my positions. They have not been arrived at lightly. Each one represents weeks of reading, conversation, and argument. I have tried to be honest. I have tried to consider the other side. I have changed my mind on specific points along the way. On the core questions, my views have only become more certain.
I want to end with one observation that has stayed with me throughout this work.
Pakistani productive citizens have endured this system for thirty-three years since PERA 1992, and longer still under the restriction era that preceded it. They have paid effective rates of 25 to 40 percent on every international card transaction. They have built parallel banking systems through Wyoming and Dubai because the formal one would not serve them. They have employed each other in the absence of meaningful state support. They have continued to earn dollars for Pakistan even when Pakistan made it harder than it should ever have been to bring those dollars home.
Despite all of this, they have not given up on the country. Most of them are still here, or maintain ties here, or send remittances here, or employ Pakistanis here. They have continued to pay taxes. To register their companies with PSEB. To file annual returns. To trust, against significant evidence, that things could get better.
That trust is the single most valuable resource Pakistan has. It is more valuable than any natural resource, any geographical advantage, any diplomatic position. It is the raw material from which any future Pakistan will be built.
The least we can do, as a country, is to deserve this trust. To work toward a banking system that, in modest ways, is a little more honest with the people who have given it so much. To end the era in which our productive citizens have to register companies in Wyoming to do business they could be doing here. To leave behind, for the next generation of Pakistani entrepreneurs, a country in which holding your own legitimately earned dollars is not a privilege of the politically connected.
That is what I believe in. That is the country I want to help build. That is why I have written all of this, this article, the position paper that came before it, the longer book, and the documents that will come after, and put my name on it.
The earnings are ours. The country is ours. The system, for now, is not.
We have a right to know. And once we know, we have an obligation to organise.
Thank you for reading.
, Asad Baig, Lahore, May 2026
Frequently asked questions
Can a Pakistani IT company have a USD account in 2026? Partially. A PSEB-registered IT company can hold up to 50 percent of its earnings in an Exporters Special Foreign Currency Account, per the October 2023 SBP EPD Circular Letter No. 17. Cash USD withdrawal from this account is not permitted. The remaining 50 percent must convert to PKR upon receipt. Many IT companies maintain offshore structures because the formal framework does not meet their operational needs.
What is the effective rate when paying $100 from a Pakistani bank card? For a tax filer, approximately PKR 350 to 360 per USD against an interbank rate of approximately PKR 280, a 25 to 30 percent premium. For a non-filer, approximately PKR 365 to 385 per USD, a 30 to 37 percent premium. The premium is composed of the bank conversion fee, Federal Excise Duty, Sales Tax on Services, advance tax, and international processing fees stacked on top of the interbank rate.
Why did Pakistan freeze foreign currency accounts in 1998? Pakistan conducted nuclear tests on May 28, 1998. The same day, the government froze all foreign currency accounts to prevent reserve depletion and capital flight. Account holders were forced to convert to PKR at a government-fixed rate of Rs 46 per USD, below the market rate. The freeze betrayed every protection that the Protection of Economic Reforms Act 1992 had statutorily guaranteed.
What is Section 111(4) of the Income Tax Ordinance? Section 111(4) of the Pakistan Income Tax Ordinance grants tax immunity to inward foreign remittances regardless of source. Combined with PERA Section 5, which prohibits inquiry into the source of foreign currency deposits, it creates a legal corridor for whitewashing domestically generated black money through offshore round-tripping. A 2018 tax compliance analysis estimated that approximately $3.8 billion a year of black money is whitewashed through this mechanism.
Has the Roshan Digital Account been a success? By March 2026, the RDA has accumulated $12.426 billion in cumulative inflows across 917,400 accounts in over 175 countries. It survived the near-default crisis of January 2023 without freezes or new restrictions. The RDA proves that Pakistani digital banking infrastructure works when properly designed and that trust can be rebuilt by consistent honouring of commitments. It remains limited to overseas Pakistanis with NICOP or POC documentation.
What is the Productive Capital Account I am proposing? The Productive Capital Account is a proposed FCY framework for Pakistan's productive class. Eligible holders include IT companies, freelancers, goods exporters, service exporters, importers, resident professionals, and overseas Pakistanis. The framework requires mandatory source verification, tax filer status for residents, beneficial ownership transparency, income-based caps, and prohibits PKR-to-USD conversion at the deposit point. Account holders gain genuine multi-currency banking, free use for foreign payments, no Pakistani card markup, and elimination of FED, SST, and advance tax on PCA transactions.
Why have FATF and the IMF not been the obstacle to reform? Singapore, the United Arab Emirates, India, Malaysia, and Bangladesh are all FATF-compliant. They all maintain IMF relationships. They all offer their productive citizens substantially better foreign currency banking access than Pakistan does. The constraint on Pakistani reform is domestic, not international. International institutions have at times been used as a convenient excuse for policy choices that were actually driven by Pakistani political economy.
How much does the current FCY system cost Pakistan annually? Approximately $25 billion to $36 billion in annual destroyed value, of which $11 billion to $20 billion is direct cost to losers and $8 billion to $21 billion is the stake of winners under the current system. The country itself is approximately neutral or net negative on the redistribution. The cumulative five-year benefit of comprehensive reform is projected at $125 billion to $180 billion.
Who benefits from keeping the current foreign currency system in place? The five main beneficiary groups are Pakistani banks, which earn $1.5 billion to $2.5 billion annually from FCY restriction-related fees and spreads; the federal government, which collects $500 million to $800 million in FED, SST, and advance taxes on FCY transactions; the elite, which gains $5 billion to $15 billion annually from rupee depreciation arbitrage on offshore wealth; the bureaucracy, which collects $1 billion to $2 billion in discretionary approval rents; and exchange companies, which earn $200 million to $400 million in premium spreads. Approximately 200,000 individuals in total.
What can ordinary Pakistanis do about this? The first weapon is information. Forward articles like this one. Discuss the topic at industry meetings, family gatherings, and on social media. Write to your MNA. Tag P@SHA, FPCCI, KCCI, or LCCI when you post about FCY restrictions. Make the basic facts of the system common knowledge. The system survives on opacity. The math of reform changes when the 165 million potential beneficiaries organise themselves with the same seriousness that the 200,000 current beneficiaries bring to defending the status quo.
Notes and sources
Every claim in this article is drawn from publicly available sources, including:
State Bank of Pakistan, Foreign Exchange Manual, Chapter 12 (cash withdrawal restrictions on ESFCA)
State Bank of Pakistan, EPD Circular Letter No. 17 (October 2023, IT exporter retention rules)
Pakistan Bureau of Statistics and SBP, Foreign Exchange Reserves Series (March 2026 figures)
World Bank Pakistan Country Update 2025
Protection of Economic Reforms Act 1992, Sections 4, 5, and 9
Anti-Money Laundering Act 2010
Income Tax Ordinance, Section 111(4)
Yaseen Anwar, Governor State Bank of Pakistan, statement on illegal remittances (October 2013)
2018 academic legal analysis of the AMLA-PERA contradiction
2018 tax compliance analysis on Section 111(4) whitewashing
OCCRP "Dubai Unlocked" investigation (May 2024)
A.F. Ferguson submission to Pakistan Supreme Court on UAE-held assets (September 2018)
The Express Tribune coverage of the June 2022 FCY freeze rumour
State Bank of Pakistan Annual Report 2003-04 on the post-9/11 remittance surge
Roshan Digital Account performance data (March 2026 SBP figures)
A complete source list with citation numbers appears in the longer investigation, The Foreign Currency Account Question in Pakistan: A Forensic Investigation, 1947 to 2026.
Related reading from Asad Baig
The Foreign Currency Account in Pakistan: A 76-Year History (1947-2026)
How Pakistan's FCY System Costs the Productive Class $25-36 Billion a Year
What India, Singapore, UAE, Malaysia and Bangladesh Do That Pakistan Refuses To
The Productive Capital Account: A Reform Proposal for Pakistan's FCY System
ESFCA Explained: Why 50% Retention Is Bookkeeping, Not Banking
Asad Baig
