Liquidity woes keep Pakistan's exports in check

Traders demand restoration of zero-rating facility in FY21 budget

KARACHI: Traders have demanded that the government resolve the liquidity problem faced by exporters on account of stuck tax refunds by restoring the zero-rating facility in the upcoming budget for fiscal year 2020-21.

“No-payment and no-refund regime is direly needed through the restoration of SRO 1,125 (zero-rating),” stated Pakistan Denim Manufacturers and Exporters Association Chairman Shaheen Merchant on Thursday.

“Pakistan’s exports cannot rise unless the burning liquidity problem being faced by exporters is addressed by the government,” he said.

“To achieve any great milestone to enhance exports, it is crucial for the government to facilitate the export sector and revise its policy of penalising exporters to incentivise them.”

Merchant lamented that the five major export-oriented sectors had been facing a tough time since the elimination of zero-rating facility and imposition of 17% sales tax.

“Textile exporters run business on very narrow profit margins and they can apply for refund only after exporting consignments,” he pointed out.

Merchant stressed that financial hardships of export industries had multiplied following the imposition of sales tax. In the larger interest of the country and to enhance exports, the government must restore the zero-rating facility in the upcoming budget, he said. He demanded that the government prioritise the export-oriented sectors and facilitate them during the current difficult times.

The export industry of Sialkot has also reiterated the demand for restoring the zero-rating regime for the five major export sectors.

Representatives of the export sectors of the city voiced fear that $2.5 billion in foreign exchange was at risk and the industry may suffer a dent of 25-30% in exports due to the absence of zero-rating.

They expressed concern over the liquidity problem arising from delay in payments by the international buyers in the wake of a worldwide lockdown owing to the coronavirus pandemic.

Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Regional Chairman Sohail Sheikh and Chief Coordinator Ijaz Khokhar were of the view that the country’s export target of $25 billion could not be achieved as authorities were reluctant to facilitate exporters.

They said the country’s exports and remittances declined significantly following the closure of global markets. Due to the suspension of global business activities, a 25% fall in exports was expected, they said.

Published in The Express Tribune, June 5^th, 2020.

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