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  • SBP relaxes cash margin restriction on import

    SBP relaxes cash margin restriction on import

    KARACHI: The State Bank of Pakistan (SBP) has relaxed restriction on cash margin requirement on imported items.

    According to a circular issued on August 05, 2022, the SBP said that banks were required to maintain 100 percent cash margin against certain items of import (HS codes), regardless of the mode of payment.

    READ MORE: SBP advises banks to issue digital verification for remittances

    In this regard, it has been decided to relax the 100 percent cash margin requirements where the credit terms of import are more than 90 days; accordingly, the banks shall obtain cash margins as per the revised percentages given in the below table:

    Term of Payment from ImportApplicable Instructions for Cash Margin Requirement (CMR)
    91 to 180 Days25%
    181 Days and above0%

    Based on the tiered-approach in Para 2 above, the cash margin requirements shall be applicable on the Rupee equivalent amount of the import transaction.

    READ MORE: SBP takes regulatory action against TAG Innovation

    It may be noted that the above instructions shall be applicable on all new import transactions initiated by the bank after the issuance date of this circular letter. However, on already initiated import transactions, the instructions may only be applied if the amendments (in terms of payment) are made subsequent to the date of the issuance of instructions in accordance with above table.

    The cash margins deposited by importers on all items subject to CMR would be non-remunerative.

    READ MORE: SBP launches crackdown against exchange companies

  • Pakistani rupee extends gain to dollar for sixth session

    Pakistani rupee extends gain to dollar for sixth session

    KARACHI: The Pakistani Rupee (PKR) extended appreciation against the US dollar on Friday for the sixth straight session since falling to historic low on July 28, 2022.

    The exchange rate witnessed Rs2.11 gain in rupee value to end at Rs224.04 to the dollar from previous day’s closing of Rs226.15 in the interbank foreign exchange market.

    READ MORE: Dollar plunges to Rs226.15 at interbank closing on August 4, 2022

    The rupee continued the gain for sixth straight session after falling to historic low. The rupee witnessed record low at Rs239.94 on July 28, 2022. However, since then the rupee is continuously gaining to the dollar.

    The local units gained about Rs15.90 or 6.62 per cent during past six trading days.

    Currency dealers said that the tight monitoring of the State Bank of Pakistan (SBP) had eased the pressure on exchange rate.

    READ MORE: Pakistani Rupee makes historic recovery; dollar ends at Rs228.80

    The SBP initiated inspection against the exchange companies on August 01, 2022. On August 2, 2022, the SBP suspended the operations of four branches of two ECs (Galaxy Exchange Co and Al-Hameed International Money Exchange Co) for violation of SBP regulations.

    The central bank also imposed monetary penalties on some ECs in the recent past. Besides, due to violations of SBP instructions, arrangements of 13 franchises have been terminated by six different ECs in the recent past.

    The dealers said that after assurance from the International Monetary Fund (IMF) that Pakistan had met all the requirement for the disbursement of $1.2 billion tranche under Extended Fund Facility (EFF).

    READ MORE: Rupee makes recovery against dollar for 3rd straight day

    The currency experts said that the rupee was also supported by reduction in trade deficit during the first month of the current fiscal year.

    The trade deficit narrowed by 18.33 per cent to $2.62 billion for the month of July 2022 as compared with the deficit of $3.23 billion in the same month of the last year.

    READ MORE: Dollar falls to Rs238.84 at interbank closing on August 01, 2022

    The trade deficit was mainly contracted due to 12.8 per cent decline in import bill during the month under review. The import bill of the country was reduced to $4.86 billion in July 2022 as compared with $5.57 billion in the same month of the last year.

    The experts, however, expressed concerns over massive decline in foreign exchange reserves. They said that expected inflows from the International Monetary Fund (IMF) would help the country’s external sector.

  • Pakistan’s foreign reserves dip to $14.21 billion

    Pakistan’s foreign reserves dip to $14.21 billion

    KARACHI: Pakistan’s foreign exchange reserves have declined by $207 million to $14.208 billion by week ended July 29, 2022, the State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $14.415 billion by week ended July 22, 2022.

    The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $13.02 billion.

    READ MORE: Pakistan forex reserves deplete to $14.42 billion

    The official reserves of the State Bank also fell by $190 million to $8.8.385 billion by week ended July 29, 2022 as compared with $8.575 billion a week ago.

    The SBP attributed the decline in foreign exchange reserves to external debt repayments.

    It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

    READ MORE: Pakistan’s forex reserves decline to $15.24 billion

    Further, the country is in negotiation with the IMF for release of next tranche under Extended Fund Facility (EFF) to boost its foreign exchange reserves.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $11.761 billion.

    READ MORE: Pakistan’s forex reserves drop to $15.61 billion

    The commercial banks held foreign exchange witnessed a nominal decline of $17 million to $5.823 billion by week ended July 29, 2022 when compared with $5.84 billion a week ago.

    The sharp decline in foreign exchange reserves has resulted in free-fall of rupee value.

    The local currency ended historic low of Rs239.94 to the dollar at closing of interbank foreign exchange market on July 28, 2022.

    READ MORE: Pakistan’s forex reserves deplete to $15.74 billion

  • SBP launches crackdown against exchange companies

    SBP launches crackdown against exchange companies

    KARACHI: The State Bank of Pakistan (SBP) has launched crackdown against exchange companies in order to end volatility in rupee value against the US dollar.

    A statement issued on Wednesday, the central bank said in view of recent volatility in the exchange rate and the difference between the interbank rate and the rate offered by Exchange Companies (ECs) and banks to their customers, it had increased the monitoring of the foreign exchange operations of ECs and banks.

    READ MORE: Pakistani Rupee makes historic recovery; dollar ends at Rs228.80

    In this respect, SBP started inspections of a number of exchange companies and banks since Monday (August 1, 2022).

    On Tuesday (August 2, 2022) SBP suspended the operations of four branches of two ECs (Galaxy Exchange Co and Al-Hameed International Money Exchange Co) for violation of SBP regulations.

    READ MORE: UBL declares 21% decline in half year net profit

    SBP has also imposed monetary penalties on some ECs in the recent past. Besides, due to violations of SBP instructions, arrangements of 13 franchises have been terminated by six different ECs in the recent past.

    SBP has also started conducting mystery shopping exercise throughout Pakistan to investigate the apprehensions that some ECs are not selling foreign currency to their customers.

    READ MORE: SBP introduces foreign currency, rupee value business accounts

    A meeting of the Exchange Companies Association of Pakistan has also been called on August 4, 2022.

    If needed, SBP would augment its enforcement actions on the ECs and the banks in light of findings of the on-going inspections and mystery shopping.

    READ MORE: SBP imposes Rs85 million as penalty on JS Bank

  • Pakistani Rupee makes historic recovery; dollar ends at Rs228.80

    Pakistani Rupee makes historic recovery; dollar ends at Rs228.80

    KARACHI: The Pakistani Rupee made a historic single day recovery of Rs9.58 against the US dollar on Wednesday to close at Rs228.80 in the interbank foreign exchange market.

    The exchange rate recorded a recovery of Rs9.58 in rupee value to end at Rs228.80 to the dollar from previous day’s closing of Rs238.38 in the interbank foreign exchange market.

    READ MORE: Rupee makes recovery against dollar for 3rd straight day

    The rupee made recovery for the fourth consecutive day after the Chief of the Army Staff (COAS) telephoned to the US for speeding up the release of IMF tranche.

    The rupee recorded historic low of Rs239.94 against the dollar on July 28, 2022.

    Analysts said that expected inflows from the IMF of $1.2 billion, there will be multilateral inflows unlocking, followed by bilateral/friendly countries, and coupled with global and local recession impacting/reducing Oil and food/commodity prices globally, there will be much lower imports (exports will also be hit), thereby lowering demand for dollar outflows. This should help improve PKR against the US$, at least for some time.

    READ MORE: Dollar falls to Rs238.84 at interbank closing on August 01, 2022

    Currency experts said that the fall in import bill during the month of July 2022 eased the pressure on the foreign currency demand. Further, the International Monetary Fund (IMF) likely to release the tranche by end of this month.

    The free-fall in rupee continued for the past many months against the greenback due to political instability and weak economic indicators.

    The experts said that the continuous decline in rupee value may also be attributed to the fall in foreign exchange reserves.

    The foreign exchange reserves of the country have further declined.

    READ MORE: Pakistan interbank rupee ends Rs239.37 to dollar on July 29, 2022

    Pakistan’s foreign exchange reserves have declined by $368 million to $15.242 billion by week ended July 15, 2022. The foreign exchange reserves of the country were $15.61 billion a week ago i.e. July 07, 2022.

    The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.986 billion.

    The official reserves of the State Bank also depleted by $388 billion to $9.329 billion by week ended July 15, 2022 as compared with $9.717 billion a week ago.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.817 billion.

    READ MORE: Rupee plunges near Rs240 to dollar at interbank closing

  • Pakistan’s trade deficit narrows by 18% in July 2022

    Pakistan’s trade deficit narrows by 18% in July 2022

    ISLAMABAD: Pakistan’s trade deficit narrowed by 18 per cent in the month of July 2022, according to data released by Pakistan Bureau of Statistics (PBS) on Tuesday.

    The contraction in trade deficit may be attributed to decline in import bill. The import bill of the country fell by 13 per cent to $4.86 billion in July 2022 as compared with $5.57 billion in the same month of the last year.

    READ MORE: Pakistan’s import bill records over $80 bn in 2021/2022

    However, the exports of the country also fell by 5.17 per cent to $2.22 billion in the month of July this year as compared with $2.34 billion in the same month of the last year.

    The trade deficit sharply narrowed by 46.76 per cent to $2.64 billion in July 2022 when compared with $4.96 billion in June 2022.

    The import billion declined by 38 per cent to $4.86 billion in July 2022 as compared with $7.88 billion in June 2022.

    Meanwhile, the exports also fell by 24 per cent to $2.22 billion in July 2022 when compared with $2.92 billion in June 2022.

    READ MORE: Pakistan’s trade deficit balloons $43.33 bn in 11 months

    Analysts at KASB KTrade Securities attributed to the strict import control measures which were put in place last month.

    They said this is the lowest trade deficit level in the last 15 months.

    “We think this should support the current account situation and will provide some confidence to the investors regarding the ability of the government in dealing with macroeconomic challenges,” according to the analysts.

    READ MORE: Pakistan’s imports hit record high at $65.47 bn in 10 months

    The analysis shows that assuming no change in demand, a 40 per cent reduction in oil prices would turn the deficit into a surplus. This means that if Pakistan had the ability to get cheaper energy from Iran or from Russia, it could have been sufficient to bridge the trade deficit.

    “Indeed, that could have had much punitive geo-economics implications and might not be a viable strategy. This also illustrates that if the oil price supply shock due to Ukraine war ends, Pakistan’s economy could return to a more stable condition.”

    Building foreign exchange reserves is the only defense strategy against external economic shocks.

    READ MORE: Pakistan’s March trade deficit widens by only 5.5%

  • Miftah assures shopkeepers of removing multiple taxes on electricity bill

    Miftah assures shopkeepers of removing multiple taxes on electricity bill

    KARACHI: Finance Minister Miftah Ismail on Tuesday assured shopkeepers and small retailers of removing all taxes being collected through electricity bills once the fixed tax regime is implemented.

    Responding to demand raised by retailers and shopkeepers, the finance minister promised to remove all the other taxes from the electricity bills once the fixed tax regime is activated to avoid double taxation, as quoted by a press release issued by Karachi Chamber of Commerce and Industry (KCCI).

    “Only GST on electricity consumption will be applicable and at the year end, they will be required to submit a document to intimate the tax authorities about the payment of taxes during the year,” Miftah Ismail was quoted as saying.

    READ MORE: FTO investigates tax collection through electricity bills

    Earlier, the KCCI office bearers highlighted that the government is already charging hefty multiple taxes on electricity bills on commercial units including Electricity Duty, General Sales Tax (GST), Extra GST, Further GST and Income Tax U/S 235 of the Income Tax Ordinance, 2001.

    In response to the protests by small retailers against the fixed retailers’ tax introduced in Finance Act 2022, Finance Minister Miftah Ismail announced to reduce the fixed tax rate from Rs. 6000 per month on non-filers to Rs. 3000 on electricity bills and exempted consumers whose electricity bills was up to 150 units.

    To voice the concerns of the small retailers, Chairman BMG Zubair Motiwala and President KCCI Muhammad Idrees called a meeting of business associations and held talks with Finance Minister Miftah Ismail and Chairman FBR on Zoom.

    READ MORE: Withdrawal of sales tax through electricity bills demanded

    During the session, they expressed concerns over the high rate of taxes being charged through electricity bills. They argued that commercial consumers are already paying multiple taxes in their monthly electricity bills including fuel adjustment surcharge, electricity duty, income tax, general sales tax, extra GST, further GST besides electricity charges, and over and above a new fixed tax has been levied on all commercial consumers which is unsustainable.

    In the meeting held at Karachi Chamber of Commerce and Industry between the Finance team and small traders, the Finance Minister Miftah Ismail promised to waive multiple taxes on electricity bills and also agreed to consider the demands of small traders to increase the threshold.

    After taking the leadership of small shopkeepers on board, Chairman Businessmen Group Zubair Motiwala and President KCCI Muhammad Idrees urged the government to accept the genuine demands of small businessmen who are already struggling to make both ends meet and increase the suggested threshold of 150 units of electricity consumption from fixed tax regime and remove other taxes from electricity bills.

    READ MORE: Tax through electricity connections on retailers, service providers

    General Secretary BMG & Former President KCCI AQ Khalil stressed on removing other taxes and consider all NTN holders as filers under the fixed tax regime.

    In the Finance Act FY22, the government imposed a fixed tax regime for retailers whereby even the unregistered consumers with zero or minimal units were getting Rs. 6000 monthly tax on electricity bills. After severe hue and cry from small traders against the new fixed tax regime for retailers, the Finance Minister Miftah Ismail announced a revision in the scheme under which up to 150 units of electricity consumption were exempted from the tax and removed the condition to charge double amount of tax from unregistered traders, making it full and final tax and also granted immunity from tax notices, audits and raids by FBR officers.

    To address the concerns, KCCI held an urgent meeting with a delegation of small businessmen receiving fixed tax on electricity bills headed by Abdul Majeed Memon Chairman, Special Committee for Small Trader of KCCI and Talat Mehmood Co Chairman Special Committee for Small Traders accompanied by representatives of several market associations of Karachi.

    READ MORE: FBR explains income tax on export of services

    KCCI had invited all the associations of Karachi and vast majority of them participated in this meeting where they unanimously agreed to the decision of Chairman BMG Zubair Motiwala that the tax may be implemented on the basis of units of consumed where up to 250 units will be exempted from tax and those consuming above 250 units of electricity may be charged fixed tax accordingly. It was also unanimously agreed that all the other taxes including Income Tax, GST Extra GST and Further GST will be replaced with this single fixed tax as full and final tax liability.

    READ MORE: FBR restores 100% depreciation deduction

    The delegation comprised of Muhammad Akram Rana Vice Chairman All Karachi Tajir Ittehad, Asif Gulfam Chairman Alliance of Arambagh Market, Dilshad Bukhari Saddar Jama Mall, Mehboob Azam President All Pakistan Small and Cottage Industry, Mehmood Hamid General Secretary All Pakistan Small Traders and Cottage Industry, Muhammad Feroz President Saddar Cooperative Market, Muhammad Fayyaz Chairman Sind Tajir Ittehad Old City Area, Rafiq Jadoon President All Pakistan Anjumane Tajiran (Bolton Market), Ilyas Memon President Tariq Road Trader Alliance, Nadeem Ahmed Khan President All Karachi Plastic Bags Manufacturing Association, Zulfiqar Shiwani Regional President Sindh Tajir Ittehad, Jamil Parachi Chairman Sindh Tajir Ittehad, Mirza Sadiq Baig Vice President Sindh Tajir Ittehad, Sheikh Muhammad Irshad Jama Alliance,  Chaudry Aamir Ali Khan President Car Association, Abdur Raheem Car Dealers Association, Abdul Qadir Noorani General Secretary Joria Bazar Market, Javed Shams Daniyal President Anjuman Tajiran e Sindh – Karachi Division, Abdul Samad Khan SVP Saddar Alliance of Market Association, Abdullah Batra Chairman Orangi Traders Association, Arif Patel Goldsmith among others. The members of the Managing Committee of KCCI also attended the meeting.

  • SBP imposes Rs85 million as penalty on JS Bank

    SBP imposes Rs85 million as penalty on JS Bank

    KARACHI: The State Bank of Pakistan (SBP) has imposed a monetary penalty of Rs85 million on JS Bank Limited for violating regulatory instructions.

    The central bank said that JS Bank Limited had violated regulatory instructions pertaining to Customer Due Diligence (CDD) / Know Your Customer (KYC), Asset Quality, foreign exchange and general banking operations.

    READ MORE: SBP introduces foreign currency, rupee value business accounts

    The SBP directed the bank to strengthen its controls/processes in the identified areas.

    The central bank on Tuesday issued details of enforcement actions against banks during the quarter ended June 30, 2022.

    The SBP imposed a total amount of Rs131.42 million on three banks during the quarter.

    An amount of Rs29.03 million as penalty has been imposed on Habib Bank Limited for violating regulatory instructions pertaining to CDD/KYC. The SBP also directed Habib Bank to strengthen its controls / processes in the identified areas.

    READ MORE: Pakistani rupee overshoots temporarily: FinMin, SBP

    Furthermore, the SBP imposed an amount of Rs17.24 million as penalty on the Bank of Punjab for violating regulatory instructions pertaining to Asset Quality and CDD/KYC. In addition to penal action, the bank has been advised to strengthen its controls / processes in the identified areas.

    The SBP from July 2019 started public disclosure of penal action against banks. “Enforcement actions are an integral part of the regulatory regime which involves imposition of monetary penalties and other actions against institutions and individuals for violations of laws, rules, regulations, guidelines or directives issued by SBP from time to time,” according to a circular issued by the central bank.

    In order to bring more transparency and strengthen market discipline, SBP has decided to publicly disclose significant enforcement actions.

    READ MORE: Rupee fall to continue till IMF fund realization: Pakistan’s top bank

  • Pakistan inflation hits 14-year high at 25% in July

    Pakistan inflation hits 14-year high at 25% in July

    KARACHI: The headline inflation based on Consumer Price Index (CPI) in Pakistan has recorded 14-year high and surged by around 25 per cent in July 2022 on year on year (YoY) basis.

    According to data released by Pakistan Bureau of Statistics (PBS) on Monday, the CPI inflation General, increased by 24.9 per cent on year-on-year basis in July 2022 as compared to an increase of 21.3 per cent in the previous month and 8.4 per cent in July 2021.

    READ MORE: Pakistan’s sensitive price inflation surges by 37.67%

    On month-on-month basis, it increased by 4.3 per cent in July 2022 as compared to an increase of 6.3 per cent in the previous month and an increase of 1.3 per cent in July 2021.

    CPI inflation Urban, increased by 23.6 per cent on year-on-year basis in July 2022 as compared to an increase of 19.8 per cent in the previous month and 8.7 per cent in July 2021.

    On month-on-month basis, it increased by 4.5 per cent in July 2022 as compared to an increase of 6.2 per cent in the previous month and an increase of 1.3 per cent in July 2021.

    READ MORE: Pakistan’s headline inflation may up 24% in July 2022

    CPI inflation Rural, increased by 26.9 per cent on year-on-year basis in July 2022 as compared to an increase of 23.6 per cent in the previous month and 8.0 per cent in July 2021.

    On month-on-month basis, it increased by 4.2 per cent in July 2022 as compared to an increase of 6.6 per cent in the previous month and an increase of 1.4 per cent in July 2021.

    Sensitive Price Indicator (SPS) based inflation on YoY increased by 28.2 per cent in July 2022 as compared to an increase of 21.7 per cent a month earlier and an increase of 16.2 per cent in July 2021.

    READ MORE: Pakistan inflation crosses 33% on high petroleum prices

    On MoM basis, it increased by 7.3 per cent in July 2022 as compared to increase of 6.2 per cent a month earlier and an increase of 1.8 per cent in July 2021.

    The Wholesale Price Index (WPI) inflation on YoY basis increased by 38.5 per cent in July 2022 as compared to an increase of 38.9 per cent a month earlier and an increase of 17.3 per cent in July 2021.

    WPI inflation on MoM basis increased by 2.0 per cent in July 2022 as compared to an increase of 8.2 per cent a month earlier and increase of 2.3 per cent in corresponding month i.e. July 2021.

    READ MORE: Petroleum prices in Pakistan push inflation 13-year high