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Thursday March 28, 2024

State Bank raises import advance payment limit to $25,000

By Our Correspondent
March 20, 2020

KARACHI: The central bank on Thursday revised up limit for banks to make advance payment on behalf of the industrial imports used in the manufacturing sector to $25,000 from $10,000 and allowed exporters to directly dispatch the shipping documents to their foreign buyers without any limit.

The State Bank of Pakistan (SBP) said the decision was taken in an effort to further facilitate the exporters as well as the manufacturing sectors.

“Authorised dealers (banks) are allowed to effect advance payment up to USD 25,000 or equivalent in other currencies, per invoice on behalf of manufacturing and industrial concerns and commercial importers for import of raw material, spare parts and machinery, for ultimate use by manufacturing and industrial concern,” the SBP said in a statement.

“Authorised dealers are advised to bring the above instructions to the knowledge of all their constituents and ensure meticulous compliance of the above and other relevant instructions on the subject.”

Besides, SBP has also allowed banks to make payments on behalf of commercial importers for imports of raw materials and spare parts on open account. It enhanced the existing limit of 50 percent of advance payment, allowed to manufacturing concerns, for import of plant, machinery, spare parts and raw materials against letter of credit, to 100 percent.

This was the second time in less than a year when the government relaxed advance payment limit on industrial imports.

In December last year, the SBP allowed advance payment of up to 50 percent of the value of imports against letter of credit to manufacturing concerns for import of plant, machinery, spare parts and raw material etc.

In January this year, the central bank allowed import advance payment of up to $10,000, or equivalent in other currencies, per invoice to manufacturing and industrial concerns and commercial importers for import of raw materials, spare parts and machinery, for ultimate use by manufacturing and industrial concerns.

The SBP said the balance of payments has witnessed significant improvement after the implementation of a market-based exchange rate system. “This improvement is helping to further relax some of the restrictions on imports,” it said then.

In July 2018, the SBP abolished the facility of import advance payments against irrevocable letters of credit (L/C) of up to 100 percent of the value of the goods and up to $10,000 per invoice for import of all eligible items without a requirement of L/C or a bank guarantee from the supplier abroad.

The objective was to restrict imports considering widening current account deficit, which now narrowed more than 70 percent in a year.

LSM sector that accounts for 80 percent to manufacturing, contracted 3.37 percent in the July-January period of FY2020. However, textile exports rose 5.3 percent to $9.3 billion in the July-February period with value-added sector showing a recovery.

Meanwhile, the SBP allowed exporters to directly dispatch the shipping documents of their exports’ consignment to their foreign buyers without any limit, subject to condition that the exporter’s export over-dues are less than one percent and the exporter has exports of at least $5 million during the previous three years.

Earlier, exporters could dispatch the shipping documents directly to their foreign buyers for export consignments of up to $100,000/, or equivalent in other currencies. This limit was in place since 2017.

“Authorised dealers may allow making of shipping documents in the name of the foreign importers and dispatch of the same by the exporters directly to the foreign consignees or their agents in the country of final destination by issuing a certificate to the carriers (ships, airlines, trucks, railways, etc.),” it said in a separate statement.

The SBP further said the exporter availing this facility is required to provide a certificate to the bank, showing bank-wise consolidated position of outstanding overdue export bills, as of quarter-end, as a percentage of the total exports proceeds realised during the preceding fiscal year. Banks would use the certificate to determine “the value of export consignment during the quarter subsequent to the quarter-end date to which the certificate relates”. “The AD (authorised dealer) may accept export performance certificates of other ADs showing export proceeds realised through them during the last three financial years in order to determine the export performance of the exporter,” it said. “The AD shall obtain an undertaking from the exporter that export proceeds against such exports will be realised as per the prescribed time period. Further, the AD, at its discretion, might obtain personal guarantees of the directors/sponsors of the firm/company to ensure realisation of export proceeds against such shipments.