Pakistan's exporters are faced with the prospect of cancellation of export orders from different countries, as their loan applications under Long-Term Financing-Export Oriented Products (LTF-EOP) are not being accepted.
Chairman, Towel Manufacturers' Association of Pakistan (TMA), Muzzammil Hussain, told Business Recorder here on Tuesday that the exporters had established letters of credit for the import of textile machinery in June 2007 when LTF-EOP scheme was still in force.
But, he said, on arrival of goods at the port, in August 2007, when their (exporters') banks submitted loan applications to the State Bank of Pakistan, these were turned down on the plea that LTF-EOP scheme had been discontinued. The machinery is lying at the port for last one month and exporters are incurring heavy demurrage charges for no fault of theirs, he said.
The machinery of some exporters relates to final stages of production process. They had earlier imported and installed preliminary stage machinery also through bank financing. Now, with an incomplete production line, they would be unable to pay back their earlier loan, and may go bankrupt, he said.
Muzzammil said that not only the exporters would fail to honour their shipments, the State Bank's policy may jeopardise the country's reputation as export orders would be cancelled due to non-delivery of shipments in time.
What is more disturbing is that the new scheme has yet to be announced. So, right now, there is no scheme, and the fate of long-term financing for exporters is in a state of uncertainty.
The TMA chairman said that in the past it used to be State Bank's practice that in case an L/C was opened before the change in government policy, it was treated as part of old policy. The exporters had established their L/C before June 30, 2007 and, therefore, should be eligible for the previous LTF-EOP policy.
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