KARACHI, July 8: The State Bank made sweeping changes in foreign exchange regulations to protect the rupee against US dollar by suspending forward cover facility against imports and reducing advance payment against imports to 25 per cent from 50 per cent.

“It has been decided to temporarily suspend forward booking against all types of imports,” said a circular issued by the SBP.

Previously, authorised dealers were allowed to purchase dollars against letters of credit (L/Cs). Now, dealers have been advised not to sell foreign exchange in advance against imports.

The SBP said commitments made before the announcement of new rules would be honoured “in accordance with the terms of related contracts subject to compliance of related rules and regulations”.

SBP’s decision regarding advances against imports would affect traders’ liquidity.

Importers were previously allowed to buy dollars in advance to the extent of 50 per cent of the value of imports.

“The facility will now be available only to the extent of 25 per cent of the FOB (Freight on Board) or CFR (Cost and Freight) value of the goods to be imported,” said the State Bank.

The central bank said it would provide foreign currency directly to dealers for buying furnace oil or other POL-related products against Form ‘M’ approvals, issued by the SB’s Exchange Policy Department. Previously, authorised dealers were required to buy dollars through the inter-bank market.

“(The) SBP will also continue to provide foreign exchange to banks for the import of all other POL products, including (furnace oil and POL-related purchases through Form ‘M’ approvals).”

The central bank also cut banks’ timings for dealing in foreign exchange. The cut-off time for all foreign exchange transactions will be 4:30pm, Monday through Friday, and till 1pm on Saturdays.

According to the circular, currency dealers have been informed that the cut-off timing for public dealings and inter-bank trade has been set till 2pm Monday through Thursday and till 1pm on Fridays and Saturdays.

Authorised dealers are, however, allowed to conduct foreign exchange swap transactions in the inter-bank market till 4:30pm Monday through Friday and till 1pm on Saturdays. Measures taken by the SBP show that exchange rate is spinning out of control and the rupee is not able to find any support against the dollar. The rupee has lost 7.2 per cent against the dollar over the past week.