State Bank abolishes import advance payment limit

KARACHI: The central bank on Wednesday withdrew advance payment limit on imports of various essential merchandises amid COVID-19 pandemic.

The State Bank of Pakistan (SBP) allowed all federal and provincial government departments, hospitals in public and private sectors, charitable organisations, manufacturers and commercial importers to make import advance payment and import on open account, without any limit. They can import medical equipment, medicines and other ancillary items for the treatment of COVID-19.

“Number of COVID-19 cases in Pakistan is increasing. An effective strategy to fight against the menace of COVID-19 requires timely availability of needed equipment,” the SBP said. “In the backdrop of unprecedented spread of the deadly virus, SBP has taken these measures to facilitate the import of much-needed equipment in a seamless manner.”

Global coronavirus spread is leading to slowdown and inactivity in the industrial sector. Economic growth already decelerated to 3.3 percent during the last fiscal year from 5.5 percent a year earlier with forecast of further plunge to below three percent during the current fiscal year.

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

Last week, the SBP 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. 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 materials.

SBP further allowed banks to approve electronic import form for import of the equipment, donated by international donor agencies and foreign governments to facilitate their seamless and speedy imports. SBP revised its existing foreign exchange regulations for import of goods against advance payment and open account. “State Bank as a responsible state institution would continue to provide its needed support in nation’s drive to fight against the menace of COVID-19,” it said.

Pakistan’s current account position tracked back to stability mode on International Monetary Fund-backed reforms. The central bank is confident about the buffer it has to manage outflows.

The central bank earlier said the balance of payments 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 in a statement. Current account deficit narrowed 70 percent over a year. Besides, brokerages are pricing in up to five billion dollars in annual relief to the trade balance as a result of oil drop with the benchmark West Texas Intermediate averaging $56 per barrel over the last year. The relief is one-third of the country’s petroleum products’ import bills.