SBP lifts import curbs to save IMF loan deal

KARACHI: The State Bank of Pakistan on Friday scrapped all import restrictions in a bid to salvage a $6.7 billion International Monetary Fund (IMF) loan programme that is due to expire at the end of this month.

With immediate effect, it has been decided to revoke the directives imposed by the December 27 circular in light of the feedback received from various stakeholders, according to the central bank circular on Friday

The SBP eliminated the requirement that banks obtain prior approval before beginning import transactions in December of last year. However, it requested that the banks provide imports of necessities, energy, agricultural inputs, products from industries with a focus on exporting, and imports with deferred payment priority and facilitation.

“The SBP had already withdrawn direct restrictions and asked banks to manage liquidity. Apparently, now the SBP has formally removed the requirement for banks. I think this will be on paper, which could be due to IMF demand of market-based exchange rate,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.

“However, behind the scenes, the non-essential imports would still be given low priority,” Rauf added.

The government is scrambling to obtain the $1.1 billion IMF tranche that has been pending since November of last year. The IMF wants to openly allow shipments and remove all import restrictions. According to importers, there are more than 12,000 containers held at ports due to a lack of dollars. All foreign vendors require prompt clearance.

Prime Minister Shehbaz Sharif recently met with the IMF managing director during the two-day New Global Financing Pact Summit in Paris. During their conversation, the Prime Minister outlined the significant reforms the country has carried out and requested assistance for the 9th review of the present programme. Even though the conclusion of the 9th review would result in the country receiving $1 billion from the IMF, this does not guarantee that money will be made available from other bilateral and multilateral partners as the current programme will expire in a week, leaving the country once more without a programme.

For the fiscal year that begins in July, the country will have to make payments on its external debt of around $23 billion.

Pakistan’s government liquidity and external positions remain fragile. The budget projects Rs6.35 trillion ($21 billion) of loans from external sources, including $1.5 billion from Eurobond issuances, $4.6 billion from commercial banks, $2.4 billion from the IMF and another $2.7 billion from other multilateral partners, according to Moody’s Investors Service report.