KARACHI: The State Bank of Pakistan (SBP) on Thursday allowed banks to make advance payments up to 50 per cent of the value of imports against letter of credit for manufacturing concerns.

The decision was taken in the wake of improved foreign exchange reserves, better balance of payments situation and stable exchange rate.

“Using this facility, manufacturing concerns will be able to import plant, machinery, spare parts and raw material etc. by making payment in advance,” the SBP notice read on Thursday.

The SBP in November allowed advance payments of up to $10,000 per invoice for import of raw materials and spare parts to manufacturing concerns for their own use only.

At that time, the SBP also eased restrictions on acquisition of services from abroad, such as consultancies. The SBP said the measure will support manufacturing sector by easing restrictions on import of plant, machinery, spare parts, raw material and related items.

Earlier in July 2018, in light of dwindling foreign exchange pressures and deteriorating balance of payments situation, SBP withdrew the advance payment facility for importers.

Subsequently, some of the restrictions were relaxed to facilitate imports in critical areas related to medicines, education and defense while most of the restrictions remained in place.

After the implementation of a market-based exchange rate system in May, pressures on the foreign exchange market have eased, said the SBP.

Published in Dawn, December 13th, 2019