KARACHI: To reduce the pressure on our dwindling foreign exchange reserve amid an import surge of non-essential items, the Central Bank has imposed a 100 percent margin deposit requirement on opening of letters of credit (LCs) for importing certain consumer items. The State Bank of Pakistan (SBP) in a circular issued in Karachi on Friday said the requirement of 100 percent cash margin has been prescribed on items such as motor vehicles, both CBU (completely built units) and CKD (completely knocked down), mobile phones, cigarettes, jewelry, cosmetics, personal care, electrical & home appliances, and arms & ammunitions etc. According to the SBP, in an exercise of powers entrusted to it under the Banking Companies Ordinance, 1962, the bank has imposed 100 percent cash margin requirement on the import of certain consumer items. This regulatory measure would, inter alia, discourage the import of these items and would have a nominal impact on the general public. Accordingly, LC opened with the commercial banks for the import of motor vehicles, mobile phones, cigarettes, jewelry, cosmetics, personal care, electrical & home appliances, arms & ammunitions etc could be done only with a minimum cash margin of 100 per cent, with immediate effect. SBP expects that this regulatory measure would help accommodate the incremental import of growth-inducing capital goods. On the other hand, stakeholders believe that the decision to impose a 100 percent margin deposit requirement by the central bank will put up prices of such items. The Chairman of Pakistan Soap Manufacturers Association (PSMA) Abdullah Zaki, said, “The decision is not in favor of the business community as they may shift focus from trade to real-estate business envisaging more return on equity”. He said restricted-imports will result in increasing the prices of all daily-use commodities and impact the already burdened common man negatively. “Instead of rupee devaluation we must opt for exporter’s incentives plan. The government should introduce an Export Bonus Vouchers Scheme for all export sectors currently on the decline instead of a cash incentive, shall declare all exports zero rated and exempt from withholding tax at purchases as well as at export stage. SBP should waive off penalties imposed on exporters due to short performance”, said the President of Lasbela Chamber of Commerce and Industry (LCCI), Ismail Suttar. However, The President of Forex Association of Pakistan, Malik Bostan, believes that this new margin deposit requirement structure will benefit the country at large because it will not only result in reduced trade deficit, but strengthen the Pakistani rupee as well.