January 1, 2003	Wednesday	Shawwal 27, 1423

KARACHI, Dec 31: The State Bank has allowed the importers to cover their third currency exposure in case goods imported are invoiced in a convertible currency. Previously this facility was available only to the exporters.

A circular (FE 24) issued by the SBP on Tuesday says that the step has been taken to deepen the foreign exchange market.

The circular has added a new paragraph in the Foreign Exchange Manual to give effect to this decision. The para reads as under:

“In the case of import of goods invoiced in any convertible currency other the US dollar it is permissible for authorised dealer (banks) to sell forward the concerned currency in terms of US dollar if the importer wishes to cover only such risk and carry dollar versus rupee risks himself. On the date of such payment the equivalent US dollars amount at the booked rate will not be claimed but converted at the spot rate and the rupee equivalent would be claimed from the importer. If the importer does not want to carry the dollar versus rupee risk himself and wants to cover the same in the forward market the same would also be permissible. The authorised dealers (banks) will conduct such transactions within their approved exchange exposure limits.”

Through the same circular the SBP has also removed the restriction on forward transactions of less than one month tenure. For this purpose an amendment has been introduced to the FE Manual. The amended paragraph reads as under:

“Authorised dealers (banks) may provide forward cover for exporters/importers/foreign private loans...and repatriable foreign currency loans...for any duration...”

Through another amendment made in the FE Manual the central bank has also allowed discounting of sight export bills. Sight bills or usance bills are the bills between two foreign countries with separate currencies.

The amended paragraph of the Manual reads as follows:

“In case an exporter books forward cover and presents thereagainst an export bill for discounting the authorised dealer (bank) may treat discounting of the usance or sight bill as delivery against the forward contract provided such bills are presented for discounting during the option delivery period only. In all other cases the foreign currency receipts in respect of discounted bills will not be considered as delivery against forward contract and the authorised dealer (bank) will discount the bill at its current applicable rate and close out the contract on maturity.”