Curbs on advance payment for imports hinder export orders
The Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has said that the latest import restriction imposed by the central bank is hindering the smooth flow of future export orders, leading to a decline in foreign exchange inflows amidst the highest trade deficit in the country’s history.
The State Bank of Pakistan (SBP), through its circular No 06 dated July 14, 2018, withdrew the facility that had allowed manufacturers to import even the basic raw material, used in export items, on advance payment. Owing to this, the facility of advance payment of up to 100% of the value of goods and up to $10,000 per invoice for the import of eligible items without obtaining letter of credit (LC) or bank guarantee from the suppliers abroad, have been disallowed.
PHMA Central Chairman Dr Khurram Anwar Khawaja voiced concern over the inconvenience caused to exporters in delivering their orders.
Khawaja, while speaking to PHMA’s central and zonal executive committees, pointed out that generally exporters imported trims and accessories from buyer-nominated foreign suppliers through advance payments as the suppliers only started working after receiving the payments.
“Thus, export-oriented units have to abide by buyers’ requirements in order to get future orders,” he added. “Additionally, the dollar value of accessories is nominal, thus, opening an LC is neither feasible nor workable, and highly time-consuming.”
In some cases, the buyers also nominate the foreign suppliers of price tags, from whom exporters should import the tags for the garments manufactured for export. These price tags cost only $250, which the supplier needs in advance.
Hence, according to Khawaja, the exporters transfer the money via TT through a bank and send a copy to the supplier, which then sends price tags through courier service on the same day, which is a matter of routine.
He pointed out that several import consignments were due as the suppliers needed advance payments, which could lead to cancellation of orders and decrease in exports. He acknowledged that the withdrawal of the advance payment facility was aimed at curtailing imports by commercial importers. However, he said the permission to make advance payments for accessories and trims for use in export products must continue.
The PHMA chairman demanded that the SBP allow only export-oriented units to make advance payment up to $10,000 per invoice for the import of all eligible items without the requirement of LC.