The State Bank of Pakistan (SBP) has begun to stifle the outflow of small-dollar sums of less than $100,000 in order to prevent a further decline in the reserves, putting several enterprises at risk of closure and financial fines.
According to the sources, Pakistan is using a variety of capital restrictions, including restrictive measures, to prevent a situation like default while the International Monetary Fund (IMF) delays approving and disbursing a loan tranche of $1.12 billion.
The severity of the crisis was demonstrated on Monday by the federal government’s decision not to relax a two-month import restriction. According to sources in the sector, the SBP discourages imports done through Letters of Credit (LCs) and against open accounts like Cash Against Document (CAD) import program.
In the CAD scheme, the exporter submits an invoice and sends paperwork to the importer’s bank through its bank. Only once the exporter has been paid through the remitting bank will the importer’s bank send the paperwork to the importer.
However, the SBP has now made the disclosure of these papers contingent upon its approval, delaying import clearance in order to save money. Today’s lack of raw materials is forcing several companies to consider reducing their output.
Factories that import raw materials to make food, pharmaceuticals, and iron are currently experiencing severe supply shortages. The mill is on the verge of closing, according to Ibrahim Tariq Shafi, Executive Director of Ittefaq Iron Industries Limited.
“We imported raw material from Dubai in order to ensure smooth operation of our operations, but due to non-release of our import documents and consequent non-availability of raw material, the mill is on the verge of closure,” he said.
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