‘SBP to facilitate import transactions as balance of payment situation improves’

ISLAMABAD: After months of deadlock on LCs due to administrative controls put in practice by the State Bank, Governor State Bank of Pakistan (SBP), Jameel Ahmed has said that the central bank will be able to facilitate full import transactions as soon as the balance of Payment situation improves.

Governor Jameel Ahmad on Wednesday assured the Senate Finance and Revenue committee that as soon as the balance of Payment situation improves, banks will be in a better position to facilitate full import transactions.

He said that the SBP is fully supporting import of pharmaceutical ingredients with special issues for the packing industry. He further added that the pharmaceutical industry can also import necessary raw material for their own consumption and no prior approval from SBP is required for any import including that of packing material. Earlier this year, the Senate committee was apprised of the delay in the provision of necessary healthcare due to import restrictions faced by the pharmaceutical industry.

If the pharmaceutical industry still faces further issues they can approach the SBP, he added.

The committee also discussed the LCs of Dawlance, Hayat Kimya and European EV electric cars. The governor assured the committee that issues pertaining to the LCs will be resolved with the revival of the IMF program. 

He also said that banks have been advised to remain vigilant and restrict the import of luxury items including luxury vehicles in CBU condition to save precious foreign exchange of the country. 

The matter was referred to the Ministry of Industries and Production for further deliberation. The committee was also informed that import of essential edibles have been made owing to the month of Ramadan, including the import of $600 million in palm oil. 

The finance committee, lamenting the sudden dollar fluctuation, said that the state bank is responsible to control and maintain the actual dollar rate and take solid measures to completely curb black marketing and smuggling of dollars.

The governor SBP admitted that the continuous deficit of the economy is due to the policy induced slow down in response to monetary policy tightening and the administrative measures to counter inflation and address external challenges.

It was informed that the total FX reserves of the country have declined to $9.3 billion as of 24 February 2023.

He said that the current account deficit is at $3.8 million dollars and will continue to reduce. “Although we were ready for $10 billion, we will be able to attain a $7 billion overall current account deficit by the end of this year”, he vowed.

Senator Mohsin Aziz pointed out that around 4 to 5 million dollars are being smuggled every year.

The committee sought details of the amount of dollars smuggled to Afghanistan in the recent period. It was also noted that due to high international inter banking rates, has resulted in Hundi and black money business, “ we can see the smuggling of dollar and black money business now being done even through infants “ remarked Senator Mohsin Aziz.

The committee recommended seriously addressing the issue of varying dollar rate of open market, inter banking and black market and bringing the rate into account so that everyone receives a fair price.

Saleem Mandviwalla also emphasized that the rupee trade with Afghanistan should also be immediately stopped, which is also contributing to external deficit. He said that the county has reached a $17 billion external deficit which was controlled and monitored better when the CCNL was in exercise and recommended to revive the working of the CCNL.

The committee was also informed by the State Bank officials that the remittances have also come down, so far 2 billion remittances took place and also there was a decline in exports from 7.4 % during July.

It was informed that the major decline in exports came from food, especially rice by 12 %. Vegetables and fruits exports have also declined by 48 and 37 percent respectively “ The remittances, the FDI and exports have come down, the only thing risen are the loans” senator Mohsin Aziz commented.

The committee, while discussing the financial scam involving Bank officials of NBP, HASCOL Petroleum Limited and Byco, was informed that an in-depth inquiry by the FIA is being conducted. Senator Saleem Mandiviwalla showed his amazement that even after sending three ex-presidents of a government bank to jail, a recorded embezzlement of 55 billion rupees, the case goes away without accountability. 

The committee deferred the matter for further deliberation.

The matter of additional PSDP demand for the protection and upgradation of Pak China Phase -I OFC project, for the establishment of Cross Border Connectivity Project, was also discussed. It was informed by the officials that once the already given funds have been utilized the remaining funds will also be released.