Thursday, 31 March 2011 12:46
Recently, the central bank allowed importers to cover forward booking of imports after keeping a lid on it for almost three years. The forward cover for importers was suspended in July 2008, when foreign reserves had sharply fallen to 3 months of imports amid sharp correction in the value of the rupee.
Although, the allowance at that time was only against the opening of Letter-of-Credit (LCs) with no chance of speculative buying, virtually every importer was busy in buying dollars in advance against respective future payments.
The regulator had to do something to give a breather to the market. However, the move could not stop the rupee’s slide and the import cover was further reduced to its lowest level of 2 months by the time the IMF came to the rescue.
Now with positive external price shocks amid consistent growth in remittances through legal channels, the import cover has increased to 5.5 months ...
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