The State Bank of Pakistan (SBP) has mandated commercial banks to share a five-day schedule of upcoming import payments, revising it upwards from the earlier two-day directive, amid official attempts to arrest the rupee decline that saw the PKR shoot to its lowest value against the US dollar last week.
The SBP has also directed banks to seek permission for imports that are valued at $500,000 per transaction, cutting in half the original payment ceiling of $1 million, which banks could make without needing central bank authorisation.
The two directives came during a meeting between commercial banks and the SBP late last week, and were confirmed to Business Recorder by multiple officials who were part of the meeting.
The moves are part of official attempts to better forecast Pakistan’s imports as well as arrest the decline of the rupee that plunged to an all-time low against the US dollar on September 15, 2021, closing at 169.12 in the inter-bank market.
The rupee has cumulatively lost nearly 10% since hitting its recent high of 152.28 barely four months ago.
The sharp fall in the rupee comes as the current account deficit widened to nearly $1.5 billion in August, putting at unease economic managers who are targeting nearly 5% growth in the ongoing fiscal year. The import of goods, according to the Pakistan Bureau of Statistics, stood at nearly $6.6 billion in August, with several analysts saying that the bill has surpassed expectations of even the SBP.
On Wednesday, the rupee closed at 168.68, a depreciation of 0.09% day-on-day against the US dollar in the inter-bank market.
A bank’s treasury department official, on condition of anonymity, said the central bank – without directly saying it – wants the rupee to become stable and stay in the range of 165-170.
Meanwhile, a foreign exchange dealer said that curbs are also being introduced in a bid to control the country’s bulging imports. “Importers were opening letters of credit on 0% markup for luxury items, which has now been stopped by the SBP,” said the dealer.
In 2019, Pakistan adopted a market-based flexible exchange rate system, effectively letting demand-supply forces determine the rupee-dollar parity. While the SBP says it does not intervene in determining the rates, officials have time and again stressed that the central bank will only manage volatility in the system, which seems to have increased given the Afghanistan situation as well as the bulging import bill.
The latest SBP directives seem to be attempts to better understand the import dynamics and upcoming payments, said a banker. “The import bill seems to have gone out of control. These measures are for the SBP to better understand the payments schedule.”