KARACHI: The State Bank of Pakistan (SBP) on Thursday denied reports that it had restricted the opening of letters of credit (LCs) for the import of oil and petroleum products in an attempt to control the dollar shortage and conserve its depleting foreign exchange reserves.
“It is clarified that the SBP has not placed any restriction (verbal or otherwise) on the opening of letters of credit or contracts for import of crude oil, LNG [liquefied natural gas] and petroleum products,” it said in a statement.
“Such misinformation is being spread with ulterior motives to create uncertainty in the market,” it added.
In fact, the SBP said it ensures timely processing of foreign exchange payments through banks related to the import of oil and gas products (including LNG) and in accordance with the contractual maturity of the trade documents.
“All the LCs/contracts for oil import are being retired on their due date through interbank foreign exchange market without any delay,” it said.
The same is also evident from trade data released by the SBP in terms of which country’s oil import stood at $1.48 billion and $1.47 billion for the month of September and October respectively, it noted.
To combat the dollar crunch, Pakistan has been reducing imports through administrative measures.
The country’s foreign exchange reserves continued to decline. The foreign reserves with the State Bank of Pakistan stood at $7.5 billion as of November 25. The reserves cover about one month of imports.
The country’s trade deficit decreased 30 per cent to $14.41 billion in the five months of current fiscal year. The fall in imports, which plummeted 20 per cent to $26.34 billion, is largely responsible for a decrease in the trade gap. However, exports also dropped 3 per cent to $11.93 billion.
In the coming months, administrative controls and declining commodity prices will keep imports within reasonable bounds, according to analysts.
However, the trade deficit will be under some pressure due to the slowdown in textile exports, which is the result of increasing inflation and weaker demand in the United States and the European Union. Additionally, the currency market’s growing spread has reduced remittance inflow through official channels, which would negatively impact the current account deficit.