Gross disbursement to textile and readymade garments sector in the first six months of 2014 clocked in at Rs1.7 trillion, according to data released by the State Bank of Pakistan (SBP).
The SBP did not release the comparable figure for the corresponding six-month period of 2013. However, the latest figure is 29.3% lower than the gross disbursement achieved in July-December 2013 when loans to the textile and readymade garments sector totalled Rs2.4 trillion.
More than Rs1.6 trillion, or 95% of the gross disbursement during the period under review, was in the category of ‘manufacture of textiles’. The category of ‘wearing apparel, readymade garments and dressing’ received disbursements of Rs85.3 billion, or 15% of the total loans extended to the textile sector.
Textile manufactures can now export their products to member-countries of the European Union (EU) at relatively lower or no tariffs under the Generalised System of Preferences scheme.
A substantially large portion of the total loan disbursement to the textile and readymade garments sector falls in two kinds of financing, namely working capital and cost of project financing. About 86.3% of Rs1.7 trillion loans disbursed in January-June were meant for working capital requirement.
The rest of the loans represented mainly borrowings for fixed investment. Financing from banks and development financial institutions against purchase of machinery during the six-month period amounted to Rs45.4 billion. Long-term investment for purchase of machinery is considered an indicator of future capacity expansion, but it was only 2.6% of the total disbursement made during the January-June period.
Businesses engaged in weaving of textiles received the highest amount in loans in the first six months of 2014. With Rs722.5 billion, disbursements in January-June were 43.4% lower than the comparable figure for July-December 2013.
Companies involved in spinning of fibres received disbursements of Rs489.9 billion in January-June, down 12.1% from the preceding six-month period. Businesses engaged in finishing of textiles took out loans of Rs204 billion in the first six months of 2014, which was 20.5% less than the comparable figure recorded in the last six months of 2013.
Disbursements to the manufacturers of readymade garments in January-June amounted to Rs52.9 billion, which is almost 10% less than the loan disbursement to the same sector recorded over the preceding six months.
Published in The Express Tribune, August 29th, 2014.
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