KARACHI: The State Bank of Pakistan (SBP) on Thursday eased 100 per cent cash margin requirements on the import of certain raw materials to support manufacturing and industrial sectors.

The central bank said the easing of the cash margin would further enhance capacity of manufacturing and industrial sectors to contribute towards the recovery of the economy in post Covid-19 era.

The cash margin condition was initially imposed in 2017 on 404 HS codes and later in 2018 on a further 131 items, with a view to contain the import of mostly consumer goods and to allow room for the import of more growth-inducing items.

However, the imposition of 100 per cent cash margin on consumer goods in 2018 played a vital role to reduce the import bill, cut the trade deficit and helped the government to bring down the current account deficit.

“Considering the challenges posed by the Covid-19 to the manufacturing sector and other economic segments, and on the representations made by various businesses and associations, the SBP re-evaluated the cash margin requirements and decided to remove this requirement on 106 items/HS codes,” said the SBP.

The removal of the cash margin requirements on these items will support businesses’ cash flows and liquidity, by freeing up funds previously held with the banks under cash margin against imports, and route these funds towards avenues of growth and development that will benefit the economy, said the SBP.

The SBP said it remains committed to facilitate industries and businesses in contributing to the growth and development of the country, and is ready to take any further actions required to support the overall manufacturing and industrial activity.

Following a deep contraction between March and June, the large-scale manufacturing (LSM) index returned to expansion in July, growing at 5 per cent (year-on-year), said SBP’s Monetary Policy statement announced on Monday. High-frequency demand indicators including auto sales, cement despatches, POL sales, and electricity consumption also reflects an encouraging pick-up in economic activity, it added.

Published in Dawn, September 25th, 2020