Forward cover rules revised by SBP – Alfalah Securities Limited

Karachi: State Bank of Pakistan (SBP) has amended forward cover facility against foreign private loans and imports to reduce exchange rate uncertainties.

According to Alfalah Securities Limited, the new rule states that the tenor of forward cover against these loans will be 12 months, or remaining maturity of the foreign private loans, whichever is lower. Moreover, no forward cover facility will be provided for a period of less than one month in both cases.

While in case where the underlying foreign loans have a tenor of more than 12 months, the tenor of the forward cover facility would be 12 months on rollover basis, or the remaining tenor of the loan, whichever is less; subject to the condition that the tenor of the forward cover should not be less than one month. Moreover, SBP has also notified that the maturity of forward contracts against import should coincide with the maturity of the underlying Letter of Credit. The measure would minimize the losses of SBP due to devaluation of Pak Rupee against Dollar.