Govt refuses to pay for bad currency bets made by textile exporters 

Adviser to Prime Minister on Commerce Abdul Razak Dawood on Wednesday made it clear that the government would not compensate losses of exporters from taxpayers’ money.

Responding to exporters’ demand of a “bailout” to mitigate losses amid crisis caused by coronavirus, Razak noted, “A few firms made a commercial decision to take risk & sold forward US$. They are now asking Govt to cover their losses (Rs15 billion).”

A few firms made a commercial decision to take risk & sold forward US$. They are now asking Govt. to cover their losses (Rs.15 billion). 1/2 @ansukhera @pid_gov @PTVNewsOfficial @RadioPakistan @ImranKhanPTI @PTIofficial @aliya_hamza @appcsocialmedia

— Abdul Razak Dawood (@razak_dawood) April 1, 2020

In a follow-up tweet, he continued, “I feel that this is not fair as it was a business decision which did not work out. It was also discussed at highest level & my views were supported. It has therefore been decided that Govt. will not compensate these firms from tax payers’ money.”

I feel that this is not fair as it was a business decision which did not work out. It was also discussed at highest level & my views were supported. It has therefore been decided that Govt. will not compensate these firms from tax payers’ money. 2/2@ansukhera @aliya_hamza

— Abdul Razak Dawood (@razak_dawood) April 1, 2020

On Tuesday, this scribe had learnt that 26 leading textile exporters of the country had asked the government to intervene by giving them the option to make international export contracts “null and void” to mitigate losses.

According to sources, exporters expected these losses to be approximately Rs12-15 billion. The expected forward booking was estimated to be around $3 billion.

"Exporters have requested the government to use the Rs100 billion reserve fund to cancel these contracts and reach settlement with commercial banks as soon as possible," said a source privy to this development.

Over the past few months, exporters had sold forward dollars at approximately Rs160, which means they would have gotten Rs160 for every dollar paid by them.

"As export orders are deferred or cancelled due to the coronavirus (Covid-19)-led shutdown of port operations and markets, they [exporters] are receiving no dollars in sales to settle this forward. This would’ve been fine if the dollar had maintained its value,” the source said.

The sudden upsurge in dollar value means that exporters have to pay the difference out of their pockets, hence causing them a loss. The government was told that this was something the exporters cannot afford in the given circumstances, and that they would likely be paying excessive penalties.

As per the source, the exporters had urged the government to reduce these losses for the textile sector to stay afloat, assuring the government of their support in minimising unemployment.