Extra payment proposed for goods
The market has once again won and forced the SBP to fall in line. PHOTO: FILE
In order to have the shipments stuck at port released, industrialists have proposed the State Bank of Pakistan (SBP) charge 10% in addition to the total payment due. They have also asked for commercial banks to make dollar payments when applicable.
While speaking to the Express Tribune, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Vice President, Shabbir Mansha Churra said, “The SBP’s policy of releasing dollars for imports after a lengthy period – around two months as the industry struggles for letter of credits (LCs) – is hurting the local industry in the larger push to curb imports.”
“The industry imports raw materials, spare parts and machines that keeps the economic wheels rolling,” he added. Mustafa Mustansir, Head of Research at Taurus Securities said, “The industrial sector is close to a standstill due to the artificial slowdown in imports.”
“There is no denying the fact that the country is short of dollars and the authorities are trying to save dollars by reducing the pace of foreign exchange release. However, a balancing act is required in this regard,” he added.
“On May 19, 2022, the government issued SRO 5989, which banned the import of luxury goods. This order was released so hastily that it drew outcry from the European Union and other international market players who argued that it was against the Kyoto Convention that seeks to promote trade and effective controls through legal provisions,” explained Mansha.
“Thereafter, the government decided to increase duties and use the SBP to slow down dollar payments that would eventually serve the same purpose of slowing down imports,” explained the FPCCI vice president.
All Pakistan Textile Mills Association (APTMA) Chairman, Asif Inam underlined that “textile machineries and spare parts have been stuck due to restrictions placed on the import of items covered under Chapter Harmonised Code (HS) 84 and 85 of Customs Tariff.”
“Harmonised Code (HS) is used internationally to categorise imports of large value,” added Mansha.
On July 5, 2022, SBP issued a circular that the industry needs prior permission to import machinery coming under the HS code of 84-85.
According to Sunny Kumar, Deputy Head of Research at Topline Securities, “The auto sector also suffered declining sales of 46% in August 2022 against the corresponding period last year because of the unavailability of completely knocked down (CKD) parts. This led to non-production days for auto manufacturers.”
“The authorities not only impeded post July 5 consignments but also held back imports which had reached Pakistan before that date. As a result, there are many pre-July 5 machinery, spare parts and raw material that are stuck at the port and are incurring losses to the industry,” Mansha lamented.
“When code 84/85 is entered into the software, it gives a reference to the SBP restrictions. When we explain the situation to commercial banks, they submit the request to SBP, which drags the entire process by months,” he added.
Published in The Express Tribune, September 15th, 2022.
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