Severe liquidity crunch adversely affecting textile exports: PRGMEA

LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has said that the severe liquidity crunch is adversely impacting the export growth, as the country’s textile exports have declined by 15.23 percent in Oct 2022 to $1.35 billion, amidst undue delay of sales refunds by the Federal Board of Revenue (FBR).

In a press statement issued here on Monday, jointly by PRGEMA Central Chairman Mubashar Naseer Butt and Zonal Chairman Waseem Akhtar Khan, said that the liquidity crisis is adversely impacting the export volume, as exporters’ liquidity has already taken a strong negative hit from adverse impacts of global recession.

Mubashar Naseer Butt observed that the value-added textile exporters are facing severe problems regarding sales tax refund payment orders (RPOs) which were issued after 3rd of Oct 2022, besides waiting for those deferred amounts, which were processed under the previous FASTER system.

PRGMEA Zonal Chairman Waseem Akhtar Khan stated that textile exporters’ sales tax refunds amount has mounted to billions of rupees, leading to hamper their business activities, putting the export industry in doldrums, reversing the progress in exports made in the last fiscal year, as the latest data shows that textile exports have dropped to $1.35 billion in Oct 2022 from $1.60 billion of the corresponding period of last fiscal year.

Waseem Akhtar Khan lamented that the government had committed with the exporters’ that refunds payment orders would be issued in 24 hours while the payments would be cleared within 72 hours of the issuance of the RPOs but practically this commitment is not being fulfilled, as the 72 hours are being extended to several weeks.

“Despite all the commitments, FBR has failed to pay the sales tax refunds of zero-rated export sector within 72 hours. Consequently, exporters are unable to procure raw materials and other accessories to execute their export orders and this will ultimately affect the country’s foreign exchange reserves, which are constantly declining.

PRGMEA Zonal Chairman urged the government to take immediate measures to ease off the financial stress and gear up the export growth. “We appeal the government to take immediate measures to arrest the slowdown in textile exports, as the unfriendly policies would bring Pakistan’s most valuable sector on the verge of collapse,” he warned.

He said that the Apparel Industry is playing a pivotal role in foreign exchange earnings, besides being a major tax payer and generating a large employment in the whole textile chain. “The sector is also absorbing the inefficiencies of the energy sector and paying the burden of other consumers,” he added.

Waseem Akhtar said that Pakistan’s textile and apparel industry is the backbone of the economy, constituting 8.5 percent of GDP, 40 percent of the industrial labour force and more than 60 percent of the country’s exports while its manufacturing share is 46 percent.

The export of readymade garments exhibited an increase of 28.75 percent to $3.9 billion during last fiscal year of 2021-2022, which has now started to adopt declining tendency due to multiple reasons, including liquidity issues. The value-added garments sector is the major tax payer and largest employment generator in the whole textile chain, he added.

Sales tax refunds should be cleared immediately because further delay would dent the liquidity of textile exporters, leading to disturb the flow of working capital further, he added.

Waseem Akhtar asked the government to work on a fast track plan to address refunds issue along with other problems of the industry. Priority should be given to the export-oriented garments sector, which is the highest value-added link in the entire textile value chain.

Copyright Business Recorder, 2022