KARACHI: Exchange firms on Saturday offered the government to pay for opening letters of credit (LCs) for imports as banks are reluctant to do so due to lack of foreign reserves.
General Secretary Exchange Companies Association, M Zafar Paracha said in a statement that several sectors and industries are facing problems due to banks’ refusal to open letters of credit.
Taking note of the crisis, exchange companies decided to share the load, as these firms help the government by providing US dollars needed for credit card settlement, educational purposes and medical treatment abroad as well as Hajj, Umrah. Offers. He added that religious pilgrimages, and other journeys.
“If the government allows, exchange companies are ready to pay up to USD 50,000/- for pending LCs and open new LCs to address concerns of the nation and country,” Pracha said.
He added that this would ensure availability of essential commodities and reduce the burden on the government.
He added that they could finance imports (Letters of Credit/LCs) worth $200-250 million in the next month. However, they said they would offer financing at 255/$… compared to 227/$ in the interbank market.
He said that the rates in the black market have increased to more than 270 rupees.
Pracha said that the financing of LCs through the open market will help divert much-needed foreign exchange from illegal hawala handi markets to the open legal market.
He said that the proposal of exchange firms has already been conveyed to Finance Minister Ishaq Dar. The currency dealers’ proposals come at a time when the country is struggling with dwindling foreign exchange reserves. According to State Bank data, the central bank’s foreign reserves fell by $245 million to $5.6 billion as of December 30.
The interbank and open market gap has widened as commercial banks refuse to open letters of credit for various import consignments, while exchange firms have yet to release dollars even to their non-commercial clients.
Importers are facing a dollar crunch, with their letters of credit either denied or consignments sitting at docks for weeks due to non-clearance from banks. It also imposes demurrage charges on importers, further deepening their liquidity problems.
On Friday, January 6, edible oil importers requested the central bank’s intervention as commercial banks refused to issue letters of credit at the interbank rate despite the sector being exempted from the condition of prior approval from the central bank.
