After the ban on the import of 826 products between 2017 and 2022, Pakistan has reopened all imports subject to 100% advance payment on import
According to a circular issued by the bank, the State Bank of Pakistan (SBP) has eliminated the necessity of depositing up to 100 percent of payment in advance for importing several commodities.
The items on which the ban has been lifted from import restrictions are raw materials for steel and cement, vehicle parts, confections, chocolate, mineral water, cigarette paper, electrical and electronic products, and certain equipment and parts.
In a circular issued on Friday, the central bank noted, “It has been decided to withdraw existing cash margin requirement/ CMR (advance payment) on import of items with effect from March 31, 2023.”
A few months ago, the SBP instructed commercial banks to prioritize import financing for various products, including energy (petroleum and LNG), medicines and medical devices, export raw materials and machinery, and autos. (including passenger cars).
The International Monetary Fund (IMF) mandated lifting the restrictions to commence its $60.5 billion loan program.
After the lift of the ban, importers no longer needed to deposit in advance. The central bank’s move was another step towards resurrecting the Extended Fund Facility (EFF) by connecting it to an IMF demand.
Nevertheless, all restrictions on advance payments have been eliminated. And eliminating the advance payment requirement for importers will reduce the liquidity requirements of importers.
Technically, the demand for US dollars on the interbank market should immediately decrease. However, the foreign exchange reserves of $4.59 billion, which only covered imports for one month, may make it nearly impossible.
In contrast, the government has reduced import demand by nearly half while minimizing the danger of defaulting on foreign debt due to inadequate foreign exchange reserves.
According to experts, the decision to eliminate import limits is a triumph for the country under any circumstances. In the past, the government occasionally imposed import restrictions to minimize foreign cash outflow.
Pakistan removed import restrictions after its current account deficit decreased to a two-year low of $78 million in February 2023 due to import control efforts. However, there remained the possibility of being unable to repay foreign debt.
China, the second-largest economy in the world, donated $1.07 billion in the previous month and an additional $2 billion on Thursday, prompting Pakistan to open its borders to imports in full.
Other international and bilateral creditors pledged approximately $9 billion for flood relief are still awaiting IMF clearance before delivering their commitments.
There are currently 826 items that are no longer subject to restrictions. The confectionery category contains ice cream, butter, chocolate, cheese, fish, yogurt, and natural honey.
The fruit and vegetable section includes fresh dates, dried fruits, prickles, bulgur wheat, juices, and mineral water.
Cigarettes, non-alcoholic beer, fragrances, and cosmetics such as nail polish and lipstick are also prohibited.
Also included are cement, clinker, raw steel (cold- and hot-rolled coil), and cigarette paper.
Other items include ready-made clothing, footwear, ceramics, electronics, electrical goods, video games, wooden furniture, motorcycles, used and reconditioned tires, tubes, and their raw materials, diapers, granite, other stones, SIM cards, other live animals, other rice in the husk (paddy), other grain sorghum (jawar), microwave ovens, LCDs, and color televisions.