The State Bank of Pakistan (SBP) has shifted 100 percent burden of foreign exchange to banks for payment against oil imports to comply with the IMF condition. The SBP on Saturday announced that all purchases of foreign exchange related to import of crude oil will be made by banks from the interbank market with effect from December 14, 2009.

The central bank has already shifted the burden of diesel, petroleum products and furnace oil to the banks. In this regard, the Exchange Policy Department of SBP on Saturday issued FE Circular No 9 to the Head or Principal Offices of all authorised dealers in foreign exchange. The Circular said: "It has now been decided that with effect from Monday, December 14th, 2009, all purchases of foreign exchange related to import of crude oil shall also be made by the banks (ADs) from the interbank market."

It advised the authorised dealers/banks to bring this to the notice of their constituents. Sources said that the SBP has taken this step on the directives of the International Monetary Fund (IMF) for approving 7.6 billion dollars standby loan for Pakistan. In November last, the Fund had imposed a condition that the SBP will phase out provision of foreign exchange for oil imports by February 1, 2010.

Now banks will make all purchases of foreign exchange, related to the all oil imports from the interbank market. In the first phase, the SBP had shifted the burden of furnace oil import payments to banks and, on January 15, 2009, it instructed banks to make all purchases of foreign exchange related to the import of furnace oil and remittances which were made on "Form M" against which specific approvals are granted by the Exchange Policy Department. In the second phase, the SBP shifted import payment of diesel and other refined oil products, while in third phase in SBP has transferred import payment of crude oil to banks. Sources said that with the current move about 100 percent oil import payments have been transferred towards banks and now the State Bank will not provide foreign exchange for oil related imports.

The country's oil import bill stood at 3.07 billion dollars in the first four months of current fiscal year, which means that banks would arrange about 9-10 billion dollars during the current fiscal year for oil import payments. However, analyst have shown concern over the current transfer and said that SBP's current move would put negative impact on the rupee. "We are expecting some depreciation in Pak rupee against dollar, as the interbank market would get some pressure due to high demand and short supply of dollar," they said.