KARACHI: The State Bank of Pakistan (SBP) on Friday relaxed the import restrictions imposed in December last year despite dwindling foreign exchange reserves.

Earlier, the banks had been advised to prioritise certain types of imports under different categories in the wake of poor foreign exchange reserves and a large trade deficit.

However, the latest decision that opens options for imports on a large scale was also taken when the country is struggling to avoid a default-like situation.

“Given the representations received from various stakeholders, it has been decided to withdraw the above instructions (issued on Dec 27, 2022) with immediate effect,” said the SBP circular.

A highly placed government official said the country is not in a position to allow imports of goods which already crossed $49bn in 11MFY23. He believes that this decision was also taken under IMF’s pressure.

“The importers will continue to arrange dollars from the grey markets since the banks are out of foreign currencies,” said a source not willing to be identified.

The previous circular advised the banks to prioritise imports related to essential sectors such as food (wheat, edible oil, etc), pharmaceutical, energy (oil, gas and coal), raw materials and spare parts, and agri inputs (seed, fertilisers and pesticides).

The priority list included the imports on a deferred payment basis, preferably from parents or sister concerns of the importers, beyond 365 days, from the shipment date.

Imports funded by foreign exchange available with the importers raised through equity or project loan or import loan from abroad, under the applicable Foreign Exchange Regulations, the list of priorities noted.

In the last, the import for export-oriented projects near completion was included in the list of priorities. Import of plant and machinery for the export-oriented projects near completion where at least 75 per cent of the project’s plant and machinery has already been imported, included.

“The decision will ease the imports of required raw materials that will help the industry to improve its performance,” said Amir Aziz, a manufacturer and exporter of textile finished products. Despite a long history the entire textile industry still depends on imported plants, parts and at least 35 per cent other imported constituents to make their products exportable.

Earlier, the central bank allowed importers to arrange dollars on their own as a result the cost of imports has gone higher due to buying costly dollars from the grey market but it helped many to continue their business.

After an inflow of $300 million received as commercial loans, the SBP’s total foreign exchange reserves stood at $3.8bn not enough to cover three-week imports.

Published in Dawn, June 24th, 2023

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