Banks Are Delaying Import Payments

Commercial banks are delaying import-related payments due to a dollar shortage caused by upcoming foreign debt repayments and conditions on forex reserves set by the International Monetary Fund (IMF). Import payments under open accounts and contracts are being deferred by 2–3 weeks. Banks are also clearing letters of credit (LCs) at rates higher than the interbank rate, reported Express Tribune. The rupee open market rate has approached Rs. 285/$ as of Friday, 30 May. The pressure stems from Pakistan’s $2.4 billion in commercial debt repayments due by June-end, mainly to China, along with other multilateral outflows. To meet the IMF’s end-June net reserves target of negative $7.5 billion, the SBP continues buying dollars from the market, which is limiting supply for importers. The end-March NIR stood at negative $10.2 billion. The SBP must improve reserves by $2.7 billion in the current quarter. Importers like PSO and PARCO have paid up to Rs. 3 more per dollar in recent transactions. This cost increase could affect fuel prices. Despite stable remittance and export inflows, dollar demand from the financial account is driving the pressure. Banking executives have urged the SBP to pause dollar buying temporarily. A seasonal rise in demand due to Hajj has added to the shortage but is expected to ease soon. In the first nine months of FY2024, SBP bought over $9 billion from the market and reduced external debt by $800 million. However, exporters warn that the tight control on the exchange rate is eroding competitiveness.