Up to 9% of late export revenues will be punished.

Up to 9% of late export revenues will be punished.
SBP tightens regulations to deter dealers from creating a fake dollar shortage.
 
KARACHI: Pakistan’s central bank has issued new regulations to tighten the process of repatriating export earnings into the country. Under the new rules, exporters who delay bringing their export earnings into the country will face fines of up to 9% of their realized export proceeds. The fines will be imposed if export proceeds are realized fully or partially after the prescribed period of up to 180 days, or earlier in some cases.

 

Exporters frequently postpone receiving payments from their international customers in anticipation of a higher rupee-dollar exchange rate, which artificially reduces the supply of US dollars in the domestic economy and causes the local currency to depreciate. Such delays also restrict the amount of US dollars available to the economy, which results in an unwarranted devaluation of the rupee against the US dollar. Such delays are unaffordable for Pakistan, which is already operating with critically low foreign exchange reserves and a substantial risk of default on repayment of foreign loans.

In accordance with a notification issued by the State Bank of Pakistan (SBP) on Friday, authorized dealers (mostly commercial banks) will convert export proceeds at the current market exchange rate and credit them to the exporters' accounts in cases where they are suddenly realized (fully or partially) after the stipulated period (a maximum 180 days in the majority of cases or earlier). Additionally, they will place a 3% lien on any export proceeds that are delayed by up to 30 days, a 6% lien on any export proceeds that are obtained later than 30 days but before 60 days, and a 9% charge on any export payments that are received after a delay of more than 60 days.

The notification states that exporters who are able to bring their delayed export proceeds to Pakistan before April 30, 2023, would not be subject to any deductions and that their export proceeds will be converted into rupees and delivered to them in a normal manner.

The central bank also instructed the authorized dealers to release to exporters the amount withheld, deducted early under the previous regulations made on February 13, 2023. “The amounts withheld by the ADS in pursuance of… (previous) instructions will also be released to the exporters,” read the central bank’s notification.

The nation is in discussions with the IMF to restart its $6.5 billion loan program, which has been on hold since November 2022. The remaining prerequisite for restarting the program is obtaining financial commitment guarantees totaling $6-7 billion from friendly nations.

A week ago, the IMF recommended that the central bank fully resume imports. The prompt receipt of export revenues into the nation and better management of foreign exchange reserves, both of which are essential for the stability of the economy, are anticipated benefits of these new regulations.

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