The State Bank of Pakistan (SBP) has eased its requirement for importers to use letters of credit (L/Cs) or bank guarantees when providing advance payment facilities.

Payments of up to US$10,000 per invoice no longer require L/Cs or bank guarantees.

Growing reserves

In April 2008, SBP restricted advance payment against import invoices to specific goods or sectors.

The easing of this requirement indicates that the central bank is recognising the country's growing foreign exchange reserves, although some analysts say the SBP's easing of import controls could widen trade imbalances.

Safety measures

The bank says it will take all possible measures to verify that advance payments are made against bona fide imports.

The SBP says it will obtain an undertaking from importers using advance payment facilities that if goods are not received within a period of four months after the payment is made - for any reason - the bank will recover a penalty.

If goods cannot be imported for any reason, the bank and the importer will ensure the repatriation of any advance payment.

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