September 14, 2023
Banking Pakistan

Banks’ Incapacity To Unlock LCs To Endanger Food Reserve

 The inability of banks to open letters of credit (LC) for the import of necessities poses a threat to the supply of food, could escalate price pressures and create a shortage of medications.

Thousands of shipping containers are stuck at the Karachi Port after offloading due to the banks’ reluctance to guarantee foreign exchange payments. Perishable and non-perishable foodstuffs and medical supplies are among the cargoes.

Despite the State Bank of Pakistan’s (SBP) directives about import facilitation, banks remain hesitant in opening credit letters for the import of necessities like edible oil and pulses. Last month, the SBP lifted import restrictions that went into force on January 2.

“In view of the orders issued last month, the SBP has given banks the power to facilitate imports. Thus, banks are not restricted from opening LCs for the importation of essentials such as food and medicine. Banks are free to make their own decisions on the opening of LCs,” SBP spokesman Abid Qamar told The News.

According to the SBP, banks should give preference to or facilitate imports that fit into the category of necessary imports, such as those related to food (wheat, edible oil, etc.) and pharmaceuticals (raw materials, life-saving/essential medications, and surgical devices, including stents).

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