The State Bank of Pakistan (SBP) has recently implemented a significant change in trade regulations, notably easing the process for advance payments or remittances to import goods.
Policy Update on Import Payments
This development is detailed in a circular issued by the SBP, circulated among all banks. The new policy allows authorized dealers to effect import advance payment with appropriate due diligence without prior SBP approval. This is applicable against irrevocable letters of credit or invoices, up to 100 per cent of the value. This change potentially increases the outflow of dollars from the country.
Additionally, the circular allows importers to pay advance remittances against their goods without needing to open a letter of credit. Importers, however, are required to buy dollars from banks as per the current practice.
Previously, the SBP allowed importers to arrange dollars from any source to open LCs. This led to a surge in demand and prices in the open market, resulting in a rapid increase in dollar rates and the emergence of a black market. In response, the government and the SBP intervened, leading to a notable decrease in the dollar rate and market stabilisation.
In the context of the forex market, exchange companies have played a crucial role by selling $3 billion to banks during the current fiscal year, aiding in market liquidity. The State Bank governor, Jameel Ahmed, mentioned that the SBP has purchased dollars from the market. This helps maintain the central bank’s reserves at around $8 billion. Despite these changes, the dollar rate in the open market has remained stable, aligning with the parameters set by the IMF.
