PHMA asks SBP to remove curbs on advance payments
Insists restriction will hurt export industries, raise cost of doing business
PHMA asks State Bank to remove curbs on advance payments. PHOTO: FILE/MUSTAFA AMIN
KARACHI:
The Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has written to the State Bank of Pakistan (SBP) that it should not apply to this export-oriented industry a new condition restricting advance payments for imports against irrevocable Letters of Credit (LCs).
According to the SBP’s Foreign Exchange Manual 2018, authorised dealers were allowed to make advance payments for imports against irrevocable LCs up to 100% of the value of goods, given that the value did not exceed $10,000 per invoice.
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This applied to the import of all eligible items without the requirement of bank guarantee from the supplier abroad.
“In this regard, it has been decided that the facility, allowing authorised dealers to make advance payments, stands withdrawn with immediate effect,” the SBP announced in its circular dated July 14.
“However, in case, authorised dealers decide that a request on the subject merits consideration, they may approach the SBP along with appropriate recommendations on a case-to-case basis,” it added.
The measure has been taken to curb the outflow of foreign exchange from the country.
The government has been trying to reduce the country’s current account deficit amid depleting foreign exchange reserves, which now stand at a meagre $9.06 billion.
However, the PHMA complained to the SBP that withdrawal of the facility would severely affect export-oriented industries, create hurdles in the way of meeting export commitments on time and increase the cost of doing business.
“Generally, exporters import trims and accessories from buyer-nominated foreign suppliers by making advance payments because foreign suppliers only start working after advance payments,” the PHMA elaborated.
“Pakistani exporters have to meet buyers’ requirements, otherwise the buyers may stop purchasing from us and approach other countries that will readily entertain them as per their requirements,” PHMA Chief Coordinator Jawed Bilwani told The Express Tribune.
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He said the accessories they imported were used when the product was near completion like tags, special packaging material and similar products that were of nominal value in dollar terms. Therefore, the opening of LC is not feasible and is time-consuming.
“The restriction on advance payment against imports to reduce domestic consumption of imported items is understandable considering the country’s deteriorating economic indicators,” he said.
“However, export-oriented industries must be allowed to make advance payments for the accessories and trims required for export-based products as foreign exchange inflows will eventually exceed outflows in our case,” said Bilwani, who exports finished textile products.
Published in The Express Tribune, July 20th, 2018.
The Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has written to the State Bank of Pakistan (SBP) that it should not apply to this export-oriented industry a new condition restricting advance payments for imports against irrevocable Letters of Credit (LCs).
According to the SBP’s Foreign Exchange Manual 2018, authorised dealers were allowed to make advance payments for imports against irrevocable LCs up to 100% of the value of goods, given that the value did not exceed $10,000 per invoice.
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This applied to the import of all eligible items without the requirement of bank guarantee from the supplier abroad.
“In this regard, it has been decided that the facility, allowing authorised dealers to make advance payments, stands withdrawn with immediate effect,” the SBP announced in its circular dated July 14.
“However, in case, authorised dealers decide that a request on the subject merits consideration, they may approach the SBP along with appropriate recommendations on a case-to-case basis,” it added.
The measure has been taken to curb the outflow of foreign exchange from the country.
The government has been trying to reduce the country’s current account deficit amid depleting foreign exchange reserves, which now stand at a meagre $9.06 billion.
However, the PHMA complained to the SBP that withdrawal of the facility would severely affect export-oriented industries, create hurdles in the way of meeting export commitments on time and increase the cost of doing business.
“Generally, exporters import trims and accessories from buyer-nominated foreign suppliers by making advance payments because foreign suppliers only start working after advance payments,” the PHMA elaborated.
“Pakistani exporters have to meet buyers’ requirements, otherwise the buyers may stop purchasing from us and approach other countries that will readily entertain them as per their requirements,” PHMA Chief Coordinator Jawed Bilwani told The Express Tribune.
Pakistan has $12.8b untapped potential for exports
He said the accessories they imported were used when the product was near completion like tags, special packaging material and similar products that were of nominal value in dollar terms. Therefore, the opening of LC is not feasible and is time-consuming.
“The restriction on advance payment against imports to reduce domestic consumption of imported items is understandable considering the country’s deteriorating economic indicators,” he said.
“However, export-oriented industries must be allowed to make advance payments for the accessories and trims required for export-based products as foreign exchange inflows will eventually exceed outflows in our case,” said Bilwani, who exports finished textile products.
Published in The Express Tribune, July 20th, 2018.