The State Bank of Pakistan (SBP) on Friday announced to withdraw cash margin requirements for opening of import letter of credit (L/C), with immediate effect. Cash margin was imposed by the central bank during last calendar year in different phases with the aim to control the rising external current account deficit owing to widening trade deficit.
In a sudden action, the SBP has withdrawn all cash margin conditions imposed for opening L/Cs. In this regard Banking Policy and Regulations Department of SBP has issued circular BPRD No 12 of 2009. After the imposition of LC margin importers were required to make 100 percent (or as per cash margin announced by SBP) payment of import at the time of LC opening and this step has compelled the importers to reduce their imports due to the liquidity shortage.
However, with current announcement, importers can imports all types of goods without any cash margin restrictions. Sources said that it was a primary condition of International Monetary Fund condition to remove the cash margin by the end of June 2009 and with current announcement SBP has meet another IMF condition.
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