Pakistan: State Bank imposes 100% cash margin on HRC, CRC

State Bank of Pakistan has decided that banks, with immediate effect, will obtain 100% cash margin on the import of 177 items, including hot rolled and cold rolled steel products.
The cash margins on these specific items will remain in place till 31 December, 2022.

The cash margins deposited by importers on all items will be non-remunerative.

To ensure effective monitoring, banks are required to submit details of cash margins, applicable on all items, collected from importers on a monthly basis.
Data for the ongoing month should be reported to the Statistics & Data Warehouse Department latest by the 10th of the following month. Further, monthly data for the period September 2020 to March 2022 is required to be submitted in the same format latest by 30 June, 2022.

All other instructions contained in the aforementioned circulars will, however, remain unchanged.

What are cash margins?

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. The government seems to have taken this step to discourage imports and support the balance of payments. Notably, the Pakistani rupee (PKR) had depreciated to an all-time low of 185.4 against the dollar. Interestingly, scrap is not there in the list issued by the government.

Various flat products, including hot and cold rolled, have been covered. However, this is less likely to be imposed for the long haul, as per a report.

Other items which have steel usage include machinery and automotive components, amongst others.