KARACHI, Sept 13: In a move to further liberalise the foreign exchange regime, the State Bank of Pakistan has allowed advance payments for import of goods.

The vital and fearless decision showed presence of massive liquidity and still growing foreign exchange inflows through foreign direct investment and remittances from the overseas Pakistanis.

“It has been decided to allow advance payments against letters of credit and firm registered contracts up to 100 per cent of the value of the imported goods,” the State Bank said in a circular issued here on Thursday. The bank would obtain an undertaking from the importer that in case goods were not received for any reason within the period of four months, the bank as well as the customer would ensure repatriation of the advance payment back.

In case the importer was unable to import goods against advance payment and underlying contract was cancelled, the bank would impose and recover a penalty at the rate of 0.25pc per month or part on the amount of advance payment from the date of remittance till date of repatriation of advance payment, the circular stated.

The bank would deposit the penalty amount with the State Bank of Pakistan.

The SBP said the bank would take all possible measures to verify the bona fides and genuineness of the transaction while processing advance payment request and may get the credit worthiness report of the foreign supplier before allowing advance payment.

In order to secure advance payment, the bank may also ask the importer to obtain performance guarantee from the supplier’s bank.

If a consistent behavior where actual imports do not take place against advance payments, the authorised dealers may debar the concerned importer from making any future advance payment.