Businessmen grill SBP chief on greenback

Chamber leaders urge central bank to provide clarity on LCs

KARACHI:

The State Bank of Pakistan (SBP) governor came under fire from the business community on Wednesday who suspected that business activities were being ruined by design amid a halt to imported raw material at the Karachi port, causing closure of businesses.

During a visit to the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and the Karachi Chamber of Commerce and Industry (KCCI), Governor Jameel Ahmad said dollar inflow in the country would improve in the coming weeks and the situation would see improvement.

During the visit, the governor accepted the business community’s proposal to arrange dollars from international lending institutions on their own for the imports. He also agreed with the business community on importing goods on a six-to-12-month credit from the international suppliers of raw material and goods.

The business community leaders said that banks were not completing documentation process for the release of imported goods from the port on credit being provided by the international suppliers. They added that the delays were causing a debilitating effect on their businesses.

“An importer told me astonishing and frightening news that anaesthesia stock in the hospitals is enough only for 15 days,” former KCCI president Zubair Motiwala said. “Do we not understand this emergency [situation],” Motiwala added.

KCCI President Tariq Yousuf said the SBP must be specific about the essential items and not just use vague term of priorities. “Businesses should be made aware of the exact value of the LCs [letter of credit] that will be given so they can import just the amount specified and avoid becoming trapped.”

Sheikh also explained that delays were causing a plethora of debilitating issues: detention charges, demurrages, shortages of raw materials for industrial production, closure of major industrial units, disruptions in the supplies of agricultural inputs, closure of plants due to unavailability of spare parts of the machinery and equipment, unfulfilment of export orders, loss of revenue due to dwindling production and massive layoffs.

Sheikh stressed that the pending cases under three different categories could be resolved immediately: all import consignments not involving dollar should be cleared with immediate effect; the SBP should come up with a crystal clear plan on what the importers can order from international suppliers to enable the business community to keep the trust of suppliers; and open account should be completely restored, as currently, it is only good for industries for their raw materials.

Former FPCCI President Anjum Nisar pointed out that there were three different markets for dollars in the country with their own rates – inter-bank, open market and grey market. “The SBP should take regulatory action against commercial banks for speculative trading and causing losses to the businessmen,” he said.

“The SBP is behaving like as if they are the World Bank or IMF [International Monetary Fund]; and, not listening to the genuine concerns of the business community,” said Mian Nasser Hyatt Maggo, the previous FPCCI president. “The situation is so precarious that there may be social unrest due to the economic disarray.”

On the occasion, the central bank governor announced a joint committee with the FPCCI for the resolution of the issue of huge backlog of LCs. The committee would comprise 4-5 nominees of the FPCCI and the same number of SBP officials.

The committee would be co-chaired by FPCCI Senior Vice President Suleman Chawla, said a statement issued by the FPCCI after the visit. It also quoted the SBP governor as saying that they would discuss individual or sectorial cases in the joint committee.

The committee would be monitored by the SBP governor, Ahmad said. He also made similar suggestion to the KCCI as well, asking them to gather data from their members and inform the central bank so that their issues were redressed on a priority basis.

Governor Ahmad also announced some broad measures to alleviate the concerns of the business community: the SBP would strive to clear the backlog of approximately 11,000 cases; food products; industrial raw materials; energy producing imports and agricultural raw materials would be given priority when opening LCs; the SBP would share its findings about the mismanagement of foreign exchange; and, appropriate action would be taken against commercial banks, if required and he would personally interact with the business community representatives to reach an early resolution.

Ahmed informed the businessmen that the SBP had cleared 33,000 cases in 2022; and, it took a lot of time, efforts and other resources. “We are expecting an enhanced inflow of dollars in the coming weeks; and, the situation will see improvement vis-à-vis dearth of dollars for imports.”