We are being unfairly penalised, say exporters
Pakistan told IMF that exports could dip to $28-29 billion in FY23, a reduction of $8.8-9.8 billion against the annual target, which requires immediate discontinuation of export subsidies. photo: file
Pakistan’s textile exporters are expressing concerns over being penalised for delayed export proceeds despite legitimate reasons for the delay.
The government’s recent implementation of State Bank of Pakistan (SBP) Foreign Exchange (FE) Circular No 02 of 2023 is leaving exporters in a difficult situation, according to Syed Usman Ali, Senior Vice Chairman of the Towel Manufacturers Association (TMA) of Pakistan.
Speaking to the Express Tribune, Topline Securities textile analyst, Nasheed Malik explained that the policy, which penalises exporters for failing to bring back earned dollars to Pakistan, is meant to encourage and incentivise repatriation of foreign earnings, thereby strengthening the country’s foreign reserves and improving economic stability. However, the penalties imposed vary with the number of days delayed in bringing back the foreign currency. The longer the delay, the higher the penalty. This penalty system is causing frustration among textile exporters who argue that they are being unfairly penalised for circumstances beyond their control.
“The timely remittance ensures that their cash flow runs smoothly so they can continue their production and exports. Delays in the remittances cause supply chain issues which is the most difficult situation to deal with for the exporters,” said Ali.
Exporters have liabilities against their purchases which they have to pay in a timely manner in order to continue their business smoothly. However, the delayed remittance can be caused by various factors generated from the importer’s side only, for instance, slow sales, delayed deliveries, delayed vessel arrivals, and a slowdown in remittance from the final customers are some of the many factors due to which importers delay payments.
Even in cases of Letters of Credit (LC), many times there are minor discrepancies which are identified by the importer’s bank at the time of payment. It takes a few days for the exporter to clear these discrepancies, thus causing delay in the payment.
The senior vice chairman of TMA urged SBP to call a productive meeting of all Exporters Oriented Associations to discuss the SBP FE circular and formulate a comprehensive strategy for the growth of exports – the backbone of our economy, he said.
The textile industry is an important sector, and its growth is crucial to the country’s long-term economic growth and development goals. The timely realisation of export proceeds is important for the industry to continue its production and exports. The implementation of the SBP FE circular, however, is causing difficulties for the genuine exporters of this country, said Ali.
Published in The Express Tribune, April 13th, 2023.
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