SBP Imposes 100% Cash Margin Restriction on 177 Items

In order to arrest the unabated imports bill, the State Bank of Pakistan (SBP) has decided to impose 100 percent Cash Margin Requirements (CMR) on the import of 177 items with immediate effect. The list includes various items that fall under the category of luxury or non-essential goods. It added electronic items, construction and furniture, food items, mobile phones, routers, memory cards, networking equipment garments, etc. The measure will help discourage imports of these items and thus support the balance of payments as per an announcement made by SBP Governor Dr Reza Baqir in an emergency meeting of the monetary policy committee which also raised policy rates by 2.50 percent to 12.25 percent. Cash margins are the amount of money an importer has to deposit with its bank for initiating an import transaction, such as opening a letter of credit (LC), which could be up to the total value of the import. Cash margins essentially increase the cost of imports in terms of the opportunity cost of the amount deposited and thus discourage imports. This step will complement SBP’s other policy measures to ease the pressure on import bill and help to contain the current account deficit at sustainable levels. The banking regulator has already imposed CMR on 525 items since September 2021. According to the circular issued by the SBP, the cash margins deposited by importers on all items shall be non-remunerative. Banks are required to submit details of cash margins, applicable on all items, collected from importers on a monthly basis to ensure effective monitoring, it added.