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

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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).”

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.”

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.

5 COMMENTS

  1. Absolutely correct decision by the government. Businesses can’t ask government to bail them out from tax payers money for their business decisions gone wrong.

  2. Seems like our textile industry is always looking for a handout. They have made billions of USD over the years have failed to increase productivity or competitiveness. Good decision by the Gov to decline their request. These 15 Billion can be spent better on a lot of other things.

  3. support the decision made by the govt. These 26 crocodiles are controlling textile sector and black mailing the govt. at every stage and in every possible way.

  4. All these years these exporters have earned s huge amount/ profit on their receivables from export ( dollar difference ) .. this is may be the one of a few time when they are going to taste a loss on their decision.. these alkegatirs have enough money in their pockets.. the only thing is they want to squeeze every single penny from Govt .. this us the time that they contribute in Govt funds rather begging for more money .. Their houses are like palaces, their cars like of Princes , their lo iving standards like Royals .. but deep from inside they ste beggars… I am sorry for my business community approach..

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