Friday August 19, 2022

SBP eases cash margin curb on imports

By Our Correspondent
August 06, 2022

KARACHI: The State Bank of Pakistan (SBP) on Friday eased 100 percent cash margin requirements on all import on deferred payments to support to facilitate importers, it said.

“To provide relief to importers, the SBP has significantly reduced cash margin requirements on deferred payments,” the central bank said on its official Twitter handle.

“Cash margin will be 25 percent for payments from 91 to 180 days and zero percent for payments beyond 180 days instead of the previous requirement of 100 percent.”

The new conditions will be available to all new import transactions, SBP said.

The SBP in last April imposed 100 percent cash margins on 177 items in a bid to curb their imports to help ease pressure on the rupee and narrow both trade and the current account deficits.

The significant rise in the current account deficit and free fall of the rupee against the dollar in the last fiscal year had increased the need to reduce the import bill. SBP’s move discouraged imports of those products and as a result lent support to the balance of payments.

Later the government banned the import of all non-essential luxury goods in a bid to stabilize the economy. The country’s major imports are fuel and edible oil and pulses, which remained unaffected.

Analysts attribute the latest SBP’s move to cut cash margins to falling imports and stability in the foreign exchange market.

Pakistan's trade deficit declined 47 percent month-on-month to $2.6 billion in July helped by a drop in imports. Total imports fell to $4.9 billion in July 2022 from $7.9 billion in the previous month. The contraction in the import bill was due to a ban on some items and lower energy imports.

The rupee has also bounced back due to less demand for the dollar for import payments and better inflows from exporters.

Analysts said the central bank decision to ease cash margin requirements was in line with International Monetary Fund funding programme.

“Under the programme the country cannot restrict its trade,” an analyst said.