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State Bank of Pakistan (SBP), the country’s central bank, has lifted restrictions on Pakistani banks opening letters of credit for all commodities in order to allow for a 25% increase in imports, according to media reports. As of July 2023, banks are required to arrange US dollars from their own sources, i.e. export proceeds and remittances, to settle import LCs.
In the past, importers have been responsible for arranging US dollars for import LCs from their own sources but have been known to acquire US dollars through smuggled goods or buying US dollars from Afghanistan or underground markets which resulted in phenomenally high US dollar rates.
Pakistan banking consultant Ahmir Mansoor informed DCW that SBP has fixed limits for banks’ USD LC exposure and excess USD availability will be transferred to another bank as directed by SBP. For instance, in the case of a bank’s non-availability of USD at time of import LC payment, the bank must approach the SBP who will instruct another bank to furnish the required USD at the interbank rate.