SBP asks traders to bring export proceeds within 120 days from date of shipment

KARACHI: The State Bank of Pakistan (SBP) on Wednesday amended foreign exchange regulations, requiring exporters to bring back proceeds within a maximum period of 120 days from the date of shipment to improve foreign currency inflows in the market.

“This move also brings in Pakistan’s regulations closer to international best practices,” the SBP said in a statement. “The new measure is expected to positively impact foreign exchange inflows in the market.” Earlier traders were required to bring their export proceeds within a maximum period of 180 days.

The statement said the central bank is of the view that flexible exchange rate has appropriately played its role as a shock-absorber and “it is important that its role be complemented by strong exports proceed realization”.

Analysts were expecting the move from the SBP as most exporters in recent days stayed away from the market expecting further weakness in the currency. The lower dollar supply, in the presence of high demand from importers, also built pressure on rupee.

The rupee declined 10 percent against the dollar last year on the back of widening current account deficit and falling foreign currency reserves. Higher imports and a spike in global commodity prices surged the trade gap, leading to a weaker currency.

The stalled International Monetary Fund Programme since April also hit the rupee. The domestic currency is also affected by the speculative transactions and forward selling of dollars from some banks to importers beyond the greenback availability.

The SBP has introduced a number of policy measures in its foreign exchange regulations to facilitate exporters in recent weeks. It allowed up to 10 percent of exporters’ annual exports for equity investment abroad to establish overseas subsidiary/branch office. Also allowed exporters who are eligible to retain part of their export proceeds to make payments abroad from their export retention account for a number of additional purposes including marketing & promotions, purchase of design/ patterns, warehousing, consultancy service etc.

The central bank also facilitating e-Commerce by allowing exporters to sell their products directly through their own websites as well as through international digital marketplaces including Amazon, e-Bay, Ali Baba and allowing exports by way of dispatch of shipping documents directly to the foreign buyer, to make exporters competitive in the international market.