The State Bank of Pakistan (SBP) and the Central Bank of Iran (CBI) are going to sign an agreement that would allow the exporters to settle claims through their respective central banks. The State Bank's Governor Ashraf Mahmood Wathra disclosed this while speaking at the Lahore Chamber of Commerce and Industry on Friday. Deputy Governor Saeed Ahmed and State Bank's senior officers were also present on the occasion. The agreement is likely to be signed in a week or so as the federal Cabinet has already accorded its approval, he added.
He said the agreement between the State Bank of Pakistan and the Central Bank of Iran would help boost mutual trade volume. Pakistan would be able to import oil from Iran mainly that was not possible earlier because of the UN embargos. Responding to the queries from the executive committee members of the Chamber, the Governor said, "We can't encourage import of consumer goods without opening of the letter of credit (L/c); Pakistan is spending around US $8.5 billion on the import of consumer items out of which a number of merchandise are unnecessary, as they are being produced locally. Meanwhile, under invoicing and smuggling were hitting the economy hard, he said and added that a restriction of cash margin has been imposed on selected consumer items.
The State Bank chief also clarified that the late payment limit of 90 days for the industries is restricted to generation of information only, not for sticking the label of defaulter. He said that law for establishment of credit bureaus has been approved that would help transmission of loans.
Talking about the national economy, Ashraf Mahmood Wathra said the macroeconomic indicators are showing positive improvement. The real GDP growth has been increased from 2.8 percent of financial years 2009-13 to 4.7 percent in 2016 while inflation went down from 11.8 percent to 2.9 percent during the same period. Growth in private sector credit rose to 11.2 percent in financial year 2016 compared with 3.1 percent of 2009-13. Similarly, the remittance jumped from 11 percent of 2009-13 to 19.9 percent in 2016 while foreign exchange reserves moved up from $11 billion to $23.1 billion. The tax to GDP ratio also improved from 9.7 percent to 12.4 percent whereas budget deficit decreased from 8.2 percent to 4.6 percent during the same period, he added.
Now Pakistan is in a position to meet the 7-month requirement of the import bill out of the current foreign exchange reserves. He said that mark up on the export refinance has been slashed from 9.4 percent of 2014 to 3 percent in January 2017 whereas on long term financing it has come down from 11.4 percent to 6 percent and to 5 percent for the textile sector during the same period. The mark up on refinancing for modernization of SMEs and financing for storage of agriculture produce has also decreased from 10 percent to 6 percent.
The State Bank's Governor said that in Pakistan and India, credit to GDP ratio is correlated to tax-to-GDP ratio that is around 11 percent and 26 percent in Pakistan and India respectively. He said that credit to GDP ratio would automatically better if tax to GDP ratio were grown in Pakistan. He said that economy has turned the corner because of supportive macroeconomic policies, successful completion of IMF program, sharp fall in oil prices and improvement in energy supplies. He said the declining oil prices has also helped us a lot to mitigate the impact of diminishing exports.
Ashraf Mahmood Wathra said the parameters of the national economy have improved during the last three-four years. He said the policy rate has been substantially slashed during last few years that led the lending rate down from 13 percent in 2012-13 to 7 percent whereas banking spread has dropped from 5 percent to 3.5 percent.
Talking about the SME sector, the governor said that banks and DFIs have been given financing targets besides putting prudential regulations to support the small and medium enterprises in place. Now the foreign investors are expressing their interest to invest in Pakistan. Some of them have either finalised their ventures with the local counterparts while some are in the process, he added. He urged the private sector to handle the driving seat of the economic growth to avail the emerging opportunities.
Responding to different questions, Ashraf Mahmood Wathra said that issue of charity collection by Islamic banks would be monitored. A penalty of 25 percent is levied on malpractices in Islamic banking. He said that mark up on credit card would be rationalised to bring at par with the international rates. He said there is no restriction on the banks for restructuring or renegotiating with the sick industry and they are at liberty to take decision in this regard.
To another question, he said that decision has been taken for privatisation of SME Bank. About the loans to farmers, he said the agri credit target would be increased to Rs 1 trillion in near future. He was of the view that the federal commerce minister should take the stakeholders in confidence before signing free trade agreements (FTAs) with other countries to protect the local industry.
Speaking on the occasion, the LCCI President Abdul Basit said that access of private sector to the credit should be easy and credit to GDP ratio should be enhanced. He said that credit to GDP ratio in New Zealand, China, India and Pakistan is 146 percent, 141 percent, 51 percent and 15 percent respectively. Banks should be directed to allocate a specific part of loan portfolio for the SME sector and lending to SME is nominal. He said that only one organization is working for industry's credit rating. There should be a separate agency for credit rating of SMEs. He said that banks should be given access to the database of Securities & Exchange Commission of Pakistan and Land Record Management Information System for online verifications. The LCCI President called for establishment of banking channels between Pakistan and Iran and Pakistan and African countries to ensure documented trade.
Abdul Basit said that establishment of EXIM bank was need of the hour. There must be representation of the Lahore Chamber in the Board of Directors of the bank. He said that advance payment limit for importers should be enhance to $ 100,000 from existing $ 10,000. He said that limit of late payment for industries should be enhanced to 180 days from existing 90 days. The Punjab Minister for Industries Sheikh Allauddin, MNA Pervez Malik also spoke on the occasion.
Comments
Comments are closed.