PAMA is concerned about SBP's new import mechanism

Local car assemblers have raised grave worries about a new method created by the State Bank of Pakistan (SBP) for the import of commodities, describing it as a severe risk to the auto sector that might result in the shutdown of all major original equipment manufacturers' manufacturing lines (OEM).

Abdul Waheed Khan, Director General of Pakistan Automotive Manufacturers Association (PAMA), wrote to Murtaza Syed, Acting Governor of SBP, requesting that CKD imports be approved quickly so that manufacturing may resume. It should be noted that the State Bank has recently introduced a mechanism for obtaining prior approval from the SBP for the import of a variety of goods for the purposes of obtaining a letter of credit, enhancing or amending a letter of credit, registering or amending a contract, making advance payments, and authorizing transactions on an open account or collections basis.

All import transactions under HS Code 8703 are subject to the SBP's prior permission condition (category CKD of motor vehicles). The new SBP guidelines have sparked outrage in the local car sector, which has approached the SBP to explain how the new system might harm the business. According to the PAMA, this sudden procedural requirement has generated roadblocks in the import of CKDs, disrupting all major auto industry imports. Abdul Waheed Khan issued a warning:

"The delay in processing approvals for CKD import transactions will cause all major OEMs to shut down production in the coming week, disrupting the entire supply chain, including local vendors, dealers, and support entities, and resulting in the layoff of daily wage and contract workers across the industry."

He said, "The delay in international payments produces a negative impression to foreign suppliers and creates a big economic risk for beneficiaries for exporting goods to Pakistan, which would have a negative long-term impact on the auto sector."

The weekly foreign payments for the import of 8703 CKD, according to PAMA, are minor in comparison to Pakistan's entire weekly foreign payments. This move appears to have delayed weekly foreign payments of up to $25 million; however, any additional delay might result in economic losses of up to $80 million and a cost to the national exchequer of roughly $30 million on a weekly basis, as well as job losses.

Automotive manufacturers have asked the SBP to expedite the licensing of CKD imports for the car sector in order to avert looming plant closures, safeguard industry jobs, and restore international investors' trust in Pakistan.

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