KARACHI: The State Bank of Pakistan (SBP) on Wednesday allowed banks to settle outstanding export loans valuing up to $50,000 (or equivalent in other foreign currencies) themselves through the interbank market.

The existing foreign exchange regulations allow authorised dealers, i.e. banks, to use foreign currency deposits for extending foreign currency trade loan facility to exporters and importers.

These regulations, however, allow settlement of such loans against exports only through the realisation of export proceeds or remittances from abroad.

In cases where export proceeds were not realised for any reason, including non-performance of export contracts or circumstances leading to cancellation of export contracts after partial performance, such loans remained unsettled.

Authorised dealers, therefore, were supposed to retain the above foreign exchange liabilities on their account books.

However, the settlement of outstanding loans exceeding the above limit will still require approval of the State Bank.

Published in Dawn, May 11th, 2017