SBP offers stop-gap solution to importers for clearance goods held at port 

KARACHI: In a letter addressed to presidents and chief executives of authorised dealers in foreign exchange, the State Bank of Pakistan’s  (SBP) Exchange Policy Department (EPD) has extended the payment terms on imports under certain circumstances to resolve the issue of imported goods stuck at ports or in transit due to the closure of L/Cs. 

“State Bank has received representations from relevant stakeholders, including various trade bodies and chambers of commerce that a large number of shipping containers, having various imported goods including perishable items, have piled up at the ports, due to delays in release of the shipping documents by the banks,” read the letter. 

This decision came after several industries had been rendered dysfunctional or staggering on the cusp of shutting down due to the shortage of raw materials in lieu of import restrictions and non-clearance of L/Cs. In order to ease the clearance process of imported goods that have already arrived at ports or are in transit since or before January 18, 2023, SBP proposed some concessions to importers. 

These concessions are two-fold, whereby;

1. The extension of payment terms is to be granted if importers are able to negotiate payment extensions with their international suppliers and vendors. In this case, Authorised Dealers are to ensure the acceptance of receipts of deferred payments  from the suppliers’ banks abroad for at least 180 days and release the shipments held at ports. 
2. The second condition declares importers eligible for arranging funds from abroad in order to settle their pending import payments. Hereby, Authorised Dealers are to process import transactions once they have received confirmation of payment from the suppliers’ bank. 

The letter further clarified that this is a temporary relief and not a long term decision. This one-time facilitation is only available to importers till March 23, 2023. Moreover, it does not apply to goods imported after January 18, 2023.  

What does this mean? 

Before importing goods and raw materials, importers have to get Lines of Credits (L/Cs) authorised by banks, so they can process the transaction. When Authorised Dealers or banks fail to clear these L/Cs, the imported goods cannot be cleared at the ports. However, in the current relaxation offered by SBP, importers can defer their payments if their suppliers agree and have their shipments cleared. This works like any other credit purchase, however in this case the payment can be delayed beyond the initially agreed upon date if both parties are on board.

As for the second clause of the letter, importers can make payments from means other than the state bank and local banks. Hereby, if importers are able to clear their payments through international sponsors or sources, the State Bank can preserve its foreign reserves. The whole issue began due to the lack of dollars in the country and this concession offers importers a loophole to proceed with their transactions without hurting the remaining dollar reserves of the country. 

Questions for the SBP 

Profit has asked the following questions from the SBP but no response has been given up until now, perhaps because of the communication problems that have arisen because of the power breakdown in the country: 

1. Does the letter imply that only the companies that can get their lines of credit extended for 180 days by suppliers will have their cargos cleared? 
2. What will happen to companies that can’t do the above or if the suppliers refuse to grant payment extensions?
3. How long will it take for companies to get their cargos cleared if they are able to do the above? 
4. Is the state bank authorising importers/companies to arrange dollars on their own accord to make the payments?
5. Will the sbp be absolved from the responsibility of facilitating these transactions (transactions dated Jan 18 or before), since they are authorising importers to arrange funds from abroad?