SBP eases cash margin restriction on import of certain items/raw materials

KARACHI: The State Bank of Pakistan (SBP) has eased 100 percent cash margin requirement on the import of certain items/raw materials to support manufacturing and industrial sectors and further enhance their capacity 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 containing the import of mostly consumer goods and to allow room for the import of more growth-inducing items.

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.

According to a circular issued on Thursday, the SBP has decided to waive the condition of 100 percent cash margin requirement on imports of 106 items.

Cash margin requirement has been removed on a number of items including Cellular Mobile with Batter, Betal Leaves, New Pneum Tyres for Motor Cars, Sanitary Towels and Tampons, Diapers for Infants and Babie, Footwear of other Materials, Betal Nuts, Rice in Husk (Paddy or Rough), Gum Base used for Chewing Gum, New Pneum Tyres Light Truks and Motorcycle, Tiles Cubes, Cooking Ranges, Window/Wall type Air Conditioners, Refrigerator Houshold, Freezers of Chest, Instant Gas Water Heaters, Fully-Automatic Machines, and Microwave Ovens.

With this facility, the importers are now will not be required to make 100 percent payment at the time of Letter of Credit (LC) opening for the import.

The SBP believed that 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.

The SBP 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.

It may be mentioned here that SBP's cash margin requirement has helped to reduce the country's goods import bill and narrow the increasing trade deficit as traders were importing more goods than the domestic requirement due to low margin on the import of luxury items. The restriction on import of goods also reduces the demand of dollar that created cushion to build the SBP's depleting foreign exchange reserves.

Copyright Business Recorder, 2020