The State Bank of Pakistan (SBP) has imposed a 100 per cent margin on letters of credit (L/Cs) used to import luxury items.

The central bank's objective is to stem the decline of Pakistan's depleting foreign exchange reserves and curtail the widening current account and trade deficits.

Luxury items

The SPB has identified 334 non-essential and luxury items that will require the 100 per cent L/C margin.

In March the SBP imposed a 35 per cent L/C margin on all imports except for food and oil.

Exchange boost

SBP hopes that these measures will boost the dollar-rupee exchange rate parity because importers would have to arrange foreign exchange on the open market.

According to SBP's latest data, Pakistan's foreign exchange reserves had dropped to US$9.38 billion dollars by late August.

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