Why are exporters crying foul against the SBP? 

LAHORE: Pakistani exporters along with the Lahore Chamber of Commerce and Industry (LCCI) on Saturday hit out against the State Bank of Pakistan (SBP) for what they claim are policies that will reduce the country’s exports to at least half their potential. 

So what is going on? 

Look at it this way. Generally, whenever a product is exported abroad the payment for it either in foreign currency or in Pakistani rupees is known as the ‘realization’ of its proceeds. However, as the economic situation has worsened in Pakistan and the rupee has slid to new lows, the central bank has felt that different exporters have been keeping their money abroad in dollars in the hope that they will ‘realize’ this money when the rate of the dollar goes up to make more profits.

Since the exchange rate fluctuates and exports are paid for in dollars, the SBP has set a time in which exporters need to convert their dollars into rupees and bring them back into Pakistan. If the exporters are not able to do this, the SBP sets some kind of penalty.  

The SBP’s policies and the exporter’s protest

On the 31st of March this year, the SBP in a circular said that exporters who are able to convert their export proceeds into rupees and bring it back to Pakistan by April 30th will not face any penalty. However, any exporters that waited longer than that would have to pay penalties. 

Exporters have reacted with indignation. The LCCI noted on Saturday that the State Bank of Pakistan (SBP) is passing anti-export laws that have the potential to reduce the country’s exports to at least half of their potential level.

In a statement, the president of the LCCI noted that the SBP’s assertion that exporters are stashing their money abroad is entirely incorrect and that this false assumption is having an impact on the policies being formed.

Maturation time equation

Exporters from different sectors including meat, carpet, auto, agriculture, leather and textile sector, led by former president LCCI Shahid Hassan Sheikh, showed their serious concerns over the notification issued by the SBP.

And this is where they have a point too. Not all exports are the same, and some require a longer realization time. Every exporting sector has its own specifications, and some are highly value added and have long shelf life like carpets and others are dealing in perishable items. 

“In light of their product diversification, shelf life and other factors, the export proceeds time should be determined after thorough consultation with those sectors who are dealing in time bounding items. According to the circular, in case of delays in bringing the export proceeds into the country, there will be fines ranging from 3% to 9% on realized export proceeds,” said Kashif Anwar, President of the LCCI.

He was of the view that this measure will adversely impact the exporters who are already facing steep and multi-dimensional challenges due to the rise in cost of doing business. 

“This measure is completely unjustified as there are often delays in export proceeds due to circumstances which are well beyond the control of exporters. This kind of notification will ultimately affect the competitiveness of our exports in the international market. LCCI requests the State Bank of Pakistan to review this measure in the best interest of our exports.”

The LCCI President said that 100% raw material of the meat exporting sector is produced in Pakistan and each sector has separate export problems. He added that meat, carpet, auto, agriculture, leather, textile sector representatives showed their serious concerns over the notification issued by the SBP. “There are sales tax refunds, custom refund, DLTL and incremental funds that should be released at the earliest,” he concluded.