SBP slaps cash margin on more goods
PHOTO: FILE
The State Bank of Pakistan (SBP) has imposed 100% cash margin requirement (CMR) on the import of 114 items, taking the total number to 525 goods that require cash margins.
The measure would discourage imports of these items, thus supporting the balance of payments.
Earlier, the SBP had revised Prudential Regulations for consumer financing by prohibiting imported vehicle financing.
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, which can be up to the total value of import.
Cash margins increase the cost of imports in terms of opportunity cost of the amount deposited and thus discourage imports.
It would be pertinent to mention that 100% CMR was initially imposed in 2017 on 404 items to discourage the import of largely non-essential and consumer goods.
The list was further expanded in 2018. However, to absorb the shocks of Covid-19, the central bank provided relief to businesses by removing the CMR on 116 items.
Published in The Express Tribune, October 1st, 2021.
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