Pakistan's central bank has waived a requirement to provide a 35 per cent letter of credit (L/C) cash margin on a number of essential imports.

The State Bank of Pakistan (SBP) introduced the requirement last month for all imports, except oil and select food commodities, as part of a strategy to curb rampant import growth.

Export assistance

The SBP said the relaxation has been made so that export-oriented industries such as textiles could import inputs needed for them to deliver on time.

"The central bank has waived the requirement of 35 per cent cash margin on a number of essential import items with a view to facilitate the trade and industry," the SPB said in a recent statement.

Trade deficit

Pakistan's trade deficit widened to US$1.93 billion in May, compared with US$1.16 billion in May last year. Exports were worth US$1.94 billion in May this year, as against US$1.59 billion in the same month last year. Imports were worth US$3.88 billion compared with US$2.75 billion last year.

The authorities imposed the 35 per cent L/C cash margin on certain items with the aim of reducing Pakistan's import bill. Under World Trade Organisation rules, the country cannot arbitrarily increase import duties; thus the country chose the L/C margins to simulate an effect similar to higher import taxes.

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