Dollars shortage hampering imports: SBP governor

ISLAMABAD: State Bank of Pakistan (SBP) Governor Jameel Ahmed has admitted that because of the shortage of dollars, the importers are facing difficulties in opening the letters of credit (LCs) and termed it a temporary phenomenon, as soon heavy inflows from multilateral and bilateral donors are expected, which will ease off the situation.

Responding to the questions raised by the parliamentarians during a meeting of the National Assembly’s Finance Committee, held under the chairmanship of Qaiser Sheikh, the SBP governor said that in this financial year the government requires $33 billion to pay its external liabilities, which includes $23 billion to pay off foreign loans and $10 billion to finance the current account deficit.

Of these external liabilities, the government had already paid loans worth $6 billion and $4 billion of debt has been rolled over.

Ahmed said that the Finance Ministry and the central bank are negotiating with the multilateral and bilateral donor agencies for the rollover of loans worth $8.3 billion.

“Instead of $13 billion, now we have to pay loans of $4.5 billion. We had already received loans of $4 billion and hopefully we will get loans worth $4 billion this year.

During the meeting, the parliamentarians severely criticised the Ministry of Finance and the State Bank for mishandling the economic situation, especially the shortage of dollars in the country.

Dr Nafisa Shah of the Pakistan Peoples’ Party (PPP) said that it seems that an undeclared economic emergency has been imposed in the country.

The business community, especially the manufacturing sector is very demoralised and uncertain about their businesses, she added.

“There is a severe shortage of dollars and our national exchequer is empty but still in the national interest I don’t want to say that my country has defaulted,” she remarked.

For her, goods have landed on the ports but the importers are unable to clear their letters of credit (LCs) and, unfortunately, no bank is willing to provide dollars to them.

The State Bank governor acknowledged that LCs of $300 million are pending but the central bank is clearing them before the deadline.

He also said that those banks overcharging from the importers or involved in hiking the value of the dollar will soon be taken to task and within this month action against them will be taken.

Nafisa Shah said that what is really alarming is that the remittances and foreign investment are declining and not only hawala and hundi business is thriving but smuggling of the dollars to bordering countries, especially Afghanistan is going unabated.

The SBP governor termed smuggling of dollars a big concern and said the central bank had already informed the security agencies about it and assured that all the possible measures would be taken to stop it.

Minister of State for Finance Aisha Ghous Pasha said that though the foreign exchange reserves are alarmingly low, the economy of the country is strong enough to face this temporary crisis and there is no possibility of a default whatsoever.

Over 75 years, this country has been providing unrealistic subsidies to the business community, which is no longer possible, she said and claimed that because of the wrong policies of the previous government, the circular debt of power and gas sectors crossed Rs4 trillion.

Whenever the government tried to tax the retail and other untaxed sectors they came out on roads and pressured the government to roll back its decision, she noted.

The IMF has demanded the government to increase its tax base and withdraw the subsidies, she added.

Ali Parvaiz Malik of the Pakistan Muslim League (PML-N) said that the government should not mislead the public that it is providing electricity to exporters on subsidised rates.

“The existing rate of electricity is Rs16/unit. I want to know from the finance and power ministries to which industry they are providing electricity below this rate. Being the former All Pakistan Textile Mills Association (APTMA) chairman, I do not see any single industry, which is getting electricity below this rate.

Meanwhile, Dar chaired an inter-ministerial follow-up meeting on anti-smuggling measures at the Finance Division.

The meeting reviewed the progress on anti-smuggling measures and roadmap to strengthen the anti-smuggling regime in the country.

The meeting was apprised that strict and vigilant operations have been initiated against the illegal cross-border movement of the foreign currency, urea, wheat and other items by the Customs, law-enforcement and intelligence agencies.

It was informed that a large quantity of foreign currency and other valuable items have been confiscated at various points between December 9 and 15, 2022 due to these strict measures.

The representatives of Pakistan Customs, FIA and Interior Ministry updated the meeting on their progress and suggested pragmatic measures to curb the menace of smuggling.

The finance minister highlighted the necessity to stop the cross-border smuggling of the foreign currency and other valuable items, affecting the economic growth and expressed satisfaction on the progress of the agencies concerned.

He also stressed upon the need to coordinate among all the agencies for this purpose and directed them to take comprehensive and combined action against those involved in the smuggling activities and currency speculation.

Dar also directed the relevant authorities to speed up their operations to curb the cross-border smuggling.

It was also decided that a regular review meeting on anti-smuggling operations will be held on a weekly basis.

At the end, the participants thanked and appreciated the finance minister for taking appropriate and active measures to tackle the current economic situation and ensured their support for ensuring smooth and sustainable economic growth.

Minister for Law and Justice Azam Nazeer Tarar, Special Assistant to the Prime Minister (SAPM) on Finance Tariq Bajwa, SAPM on Revenue Tariq Pasha, SBP governor, Finance secretary, Interior secretary, I&I Customs director general, Member Customs, FIA assistant director general (ADG) and senior officers from the Finance Division participated in the meeting.