ISLAMABAD: Non-performing loans (NPLs) of the textile sector have increased to Rs188 billion, indicating the after-effects of a constant fall in exports amid declining profitability, leading to huge defaults among industry participants.
These loans were obtained from private banks by several textile firms and have been outstanding for more than a decade now, Textile Secretary Hasan Iqbal informed a meeting of the Senate Standing Committee on Commerce and Textile on Tuesday.
The secretary said that most of these loans were taken from private commercial banks, including Habib Bank Limited.
Textile mills obtained these loans to fulfil working capital requirements and expand production lines, but the millers could not meet their obligations due to a decline in exports over past several years.
Another reason for default is that some companies have redirected their loans, meant for textile businesses, towards the real estate sector where there are greater returns, according to the Textile Division secretary. Some companies, he said, have also gone bankrupt. “Thousands of acres of land were purchased by these companies which also have capital in other businesses,” said the secretary.
Iqbal said NPLs amounting to Rs10 billion were recovered by the government over the past few years, adding, however, that the amount is not enough. Iqbal also said that a high amount of NPLs was one of the factors for low textile exports. “We can touch the $30-billion mark but are standing at $14 billion.”
Pakistan’s total exports plunged by one-fourth to $20 billion during first four years of the PML-N government.
Committee Chairman Senator Shibli Faraz urged the government’s support to resolve the lingering issue of huge NPLs, although majority of these loans were obtained from private banks.
Published in The Express Tribune, January 10th, 2018.