KARACHI: The State Bank of Pakistan (SBP) Friday announced the removal of Cash Margin Requirement (CMR) on import of goods.
Analysts said that the step has been taken to resume the International Monetary Fund (IMF) Extended Fund Facility (EFF) programme and get the loan tranche of $1.2 billion.
The SBP had taken a number of measures to curtail the import bill and reduce the pressure on the foreign exchange reserves. As a part of these steps, cash margin requirement was imposed on a number of imported items to control the rising import bill.
Most of the CMR were imposed during the last year (CY22), when the country’s foreign exchange were rapidly depleting due to massive external debt servicing and low foreign inflows.
The SBP’s this move helped contain the goods import bill at $37.38 billion during the first eight months of this fiscal year (FY23) compared to $47.33 billion in the same period of last fiscal year (FY22), showing a decline of $10 billion.
However, now the SBP has decided to remove the cash margin requirement on the goods import. According to a circular issued on Friday, SBP has decided to withdraw the existing Cash Margin Requirement on import of items with effect from March 31, 2023.
Accordingly, CMR instructions issued by the SBP vide BPRD Circular No. 02 of 2017, BPRD Circular No. 05 of 2018, BPRD Circular Letter No. 30 of 2021, BPRD Circular Letter No. 09 of 2022, BPRD Circular Letter No. 25 of 2022 and BPRD Circular Letter No. 37 of 2022 would stand withdrawn with effect from March 31, 2023.
Analysts said that it seems another step to revive the stalled IMF program and get the loan tranche to build the State Bank’s foreign exchange reserves, which stood at $ 4.6 billion.
In addition to complying with the IMF requirements, the removal of cash margin will support the ease of doing business in Pakistan as a number of companies were facing shortage of raw material due to imposition of cash margin restrictions.
The government is making efforts to resume the IMF program to get the EFF tranche of over one billion dollars. The IMF delegation visited Pakistan during January 31-February 9 to hold discussions under the ninth review of the EFF arrangement.
At the end of the visit, the IMF team welcomed the Prime Minister’s commitment to implement policies needed to safeguard macroeconomic stability and accepted that considerable progress was made on policy measures to address domestic and external imbalances. However, the IMF mission was not fully satisfied and asked for further progress on pending issues.
Analysts said it is crucial for Pakistan to get a staff level agreement with the IMF to obtain EFF tranche as the release of loan from the IMF will unlock further inflows from other international creditors.