Pakistan's imposition of a 100 per cent margin deposit requirement on the opening of certain import letters of credit (L/Cs) appears to be contributing to the country's improved economic outlook.

The measures appear to have dampened imports of non-essential items while exports and remittances received from Pakistanis working abroad are also helping improve the economy.

L/C requirements

To reduce the pressure on dwindling foreign exchange reserves amid a surge of imports of non-essential items, the State Bank of Pakistan announced in February 2017 a requirement of a 100 per cent cash margin on import L/Cs for certain goods including motor vehicles, mobile phones, cigarettes, jewellery, cosmetics and home appliances.

Other measures to discourage imports introduced by the government included adjustments in duty rates and the restriction of non-essential imports through non-tariff adjustments.

Imports and exports

Imports are however increasing - by 19 per cent in the last six months. But according to government, the increase is fuelled by machinery imports for China-Pakistan Economic Corridor projects that are benefitting the productive economy.

Exports meanwhile have surged more than 11 per cent in the last six months after four years of decline.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.