The central bank Tuesday clarified to the authorized dealers that in all cases the maturity of the forward contract against import should coincide with the maturity of the underlying Letter of Credit (L/C). Referring to F.E. Circular No. 06, which was issued on December 21, 2011, the State Bank of Pakistan said in case of issuance of an L/C, which requires payment to be made after a given number of days of shipment and the shipment date has been determined on or before the L/C expiry date, the forward contract can be rolled over on forward maturity date to coincide with L/C payment date. This, it said, was subject to the condition that the roll over is not for less than one month. The central bank said in case the shipment period was not determined on the L/C expiry date, forward cover cannot be rolled over and has to be closed out at the prevailing exchange rate on the L/C expiry date. “Where L/C payment is due before L/C expiry/forward maturity, forward contract would have to be taken up on the date when the payment is due for delivery to the customer,” it said in a circular issued Tuesday. Even, the regulator said, in cases where partial shipments were allowed, the forward contract against import should coincide with the maturity of the underlying letter of credit. In case of partial payment prior to the L/C expiry date, the forward contract can be taken up to the extent of the partial payment. In case of partial payments after the L/C expiry date please refer to our clarification at S. No.1 above, it said.
Maturities of forward import cover and L/C must coincide: SBP
