The State Bank of Pakistan (SBP) is refusing to establish letters of credit (LCs) through private banks, endangering imports of electric vehicles made in the EU, according to a letter Alfred Grannas, the German ambassador to Pakistan, sent to the Federal Minister for Economic Affairs Division (EAD).

The letter provided insight into the challenging circumstances faced by Pakistan's authorized Mercedes-Benz, BMW, and Audi exporters who deal in electrified cars (EVs). It claimed that even though EVs are good for the climate, the SBP would not permit their entry.

A favorable regulatory environment for EV shipments, the German ambassador continued, is a significant development. The letter continued, "In addition, this promises to lessen Pakistan's dependence on imports of petroleum products, which account for nearly $22 billion of its estimated $72 billion overall import bill.

According to Envoy, both in terms of volume and worth, Germany is Pakistan's top business partner in the EU. He voiced concern, saying that the LCs problem might impair trade ties between the two nations.

A Counter Argument:

According to experts and economists, the German Envoy's reasoning is, at best, ambivalent.

It is a well-known truth that only luxury car brands like Mercedes-Benz, BMW, Audi, and Porsche produce German electric vehicles in Pakistan. Each electric vehicle costs a fortune and depletes foreign currency savings significantly.

The worst economic catastrophe in Pakistan's history is presently underway, and many local industries are experiencing sporadic shutdowns. The local economy and sectors would only suffer more if foreign currency outflows were encouraged.
Opening LCs for high-end premium EVs is therefore not at all a practical option.

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