SBP imposes 100pc cash margins on 177 imported items

KARACHI: The State Bank of Pakistan (SBP) on Thursday imposed 100 percent cash margins on 177 items in a bid to curb their imports, which would help ease pressure on the rupee and narrow both trade and the current account deficits.

“It has been decided that banks, with immediate effect, shall obtain a 100 percent cash margin on the import of items. The cash margins on these specific items will remain in place till December 31, 2022,” the SBP said in a circular.

“The cash margins deposited by importers on all items shall be non-remunerative,” it added.

The significant rise in the current account deficit and free fall of the rupee against the dollar has increased the need to reduce the import bill, which jumped 49 percent to $58.7 billion in the nine months (July-March) of this fiscal year.

SBP’s latest move is likely to discourage imports of these products and as a result lend support to the balance of payments.

The widening of the current account gap caused 6.2 percent depreciation in the currency since January 2022. It has dropped by 16.28 percent so far in FY2022.

The SBP has hiked the policy rate by 2.50 percentage points to 12.25 percent. Besides policy rate increase, the SBP has taken further actions to reduce pressures on inflation and the current account, such as widening the set of import items subject to cash margin requirements.

“These items are mostly finished goods including luxury items and exclude raw materials,” the SBP said in a monetary policy statement.

Interest rate on EFS increased

The SBP raised the markup rate for financing under the Export Finance Scheme (EFS) by 2.5 percent following an increase in the policy rate.

The markup rates for EFF would be 5.5 percent per annum with effect from April 8, 2022.

“It has been decided to increase the markup rate for financing under the Export Finance Scheme by 2.5 percent in line with the increase in policy rate announced in the MPC meeting today,” it said in a circular.

“Accordingly, the markup for the Export Finance Scheme (both Part I and Part II) will be 5.5 percent pa with effect from April 8, 2022 till further instructions. Banks’ spread for corporate borrowers and SME borrowers will remain unchanged ie 1 percent and 2 percent, respectively,” it added.

This revision in rates would not be applicable on financing under rupee-based discounting facility of EFS, it said.