Business Recorder
KARACHI: The State Bank of Pakistan (SBP) on Thursday empowered banks to issue Financial Instruments (FIs) at the time of registration of import contracts for crude oil and petroleum products, citing the prevailing geopolitical situation. The SBP has also allowed banks to issue Standby Letters of Credit (SBLCs) to facilitate the import of crude oil, petroleum products and liquefied natural gas (LNG). The SBP has announced amendments to instructions relating to “Imports under Pakistan Single Window (PSW)-Financial Instrument Details” and “Guarantees on behalf of Residents of Pakistan in favor of Non-Residents” under the Foreign Exchange Manual (FEM). READ MORE: On CIF basis for 60 days: SBP allows import of crude oil, POL items According to SBP, in view of the prevailing geopolitical situation and to ensure smooth energy imports including crude oil, petroleum products and liquefied natural gas (LNG), it has decided to delegate key operational powers to authorized dealers. The move is aimed at facilitating the timely import of crude oil, petroleum products and LNG, which remain critical for the country’s energy needs. Under the revised arrangement, banks have been allowed to issue Financial Instruments (FIs) for the import of crude oil and petroleum products at the time of registration of import contracts. This is expected to expedite documentation and reduce delays in initiating import transactions. Additionally, authorized dealers can now issue Standby Letters of Credit (SBLCs) for the import of crude oil, petroleum products and LNG. The state bank believes that granting these powers to banks will streamline trade processes and provide greater flexibility to importers amid global uncertainties. The SBP said the move aims to ensure uninterrupted energy supplies and ease procedural bottlenecks in light of global uncertainties impacting commodity markets. As per the updated procedure, authorised dealers will communicate details of import transactions through electronic data interchange (EDI) with the Pakistan Single Window system. Financial instruments will be issued in prescribed formats on behalf of importers upon fulfillment of conditions such as advance payments, establishment of letters of credit, and receipt of shipping documents from foreign banks, or issuance of shipping guarantees under registered contracts. The state bank also allowed issuance of financial instruments upon registration of import contracts by oil refineries and marketing companies. However, it emphasized that payments must strictly be made against presentation of shipping documents in accordance with the agreed contract terms. For imports on an open account basis, banks will issue instruments upon receipt of a declaration from PSW. The SBP further directed that the expiry of financial instruments must align with the underlying transaction, including contracts, letters of credit or advance payments. To implement these changes, amendments have been made in relevant sections of Chapter 13 and Chapter 19 of the FEM, with detailed instructions shared as an annexure. The SBP advised banks to inform their clients about the revised mechanism and ensure strict compliance, as Pakistan looks to safeguard its energy supply chain amid evolving global dynamics. In addition, prior approval will be mandatory for issuing guarantees, undertakings, or opening letters of credit, including SBLCs, where such instruments may result in payments to non-residents in foreign currency or Pakistani rupees. According to the revised instructions, applications seeking permission for guarantees linked to foreign currency borrowing from abroad or equity investment overseas will be routed to the Director, Exchange Policy Department of the SBP. Meanwhile, all other guarantee-related cases will be submitted to the Director, Foreign Exchange Operations Department of the State Bank of Pakistan-Banking Services Corporation (SBP-BSC). The SBP directed that such applications must include complete details of the proposed guarantee or SBLC, including the amount, validity period, purpose, and possible invocation scenario. These requirements will also apply to renewal cases, where applicants must additionally provide information on the extent of utilization of the facilities during the previous validity period. In case a guarantee is invoked, the concerned authorized dealer has been instructed to report full details of the transaction to the SBP or SBP-BSC within one week. However, the SBP has clarified that these restrictions will not apply to certain trade-related transactions. These include letters of credit or similar instruments used to finance imports into Pakistan under the relevant provisions, as well as SBLCs issued for the import of crude oil, petroleum products, and LNG on behalf of oil refineries, marketing companies, and LNG importers. Copyright Business Recorder, 2026
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