Deductions by Banks on Realization of Export Proceeds Must Stop

Karachi (PR): Mr. Irfan Iqbal Sheikh, President FPCCI, has demanded that the State Bank of Pakistan should immediately bar & discontinue the charge of 3 – 9 percent by commercial banks or Authorized Dealers of SBP in foreign exchange on account of fines or lien-marking on exporters’ accounts for the unfounded but deemed delay in the realization of their export proceeds. This tantamount to discouraging exporters to bring their earnings back home to avoid unbearable financial losses, he added.

It is pertinent to note that Authorized Dealers are deducting 3 percent fine / marking lien on the amount of export proceeds delayed by up to 30 days; 6 percent on realization of export proceeds delayed by more than 30 – 60 days and 9 percent on export payments received with a delay of more than 60 days.

Mr. Irfan Iqbal Sheikh maintained that it is particularly concerning that SBP has issued a circular on April 30, 2023 to instruct Commercial Banks / Authorized Dealers to accept & accommodate genuine cases of delay in the realization of export proceeds and exempt them from fines & lien-marking; nonetheless, as usual, directives of the SBP have not been implemented in letter and spirit.

Mr. Irfan Iqbal Sheikh noted with profound concerns that it is surprising that the documentation of exporters or their foreign buyers are not given due weightage; and, Authorized Dealers are making their ill-informed & misinterpreted decisions themselves and making undue deductions on export proceeds of the already much distressed & burgeoned exporters of Pakistan.

Foreign exchange is lifeline of Pakistan’s economy at the moment and exporters need to be facilitated & incentivized for bringing the dollars inwards, rather than slapping them with unfair & illegitimate fines, FPCCI Chief added.

Mr. Suleman Chawla, SVP FPCCI, explained that there have been a number of genuine impediments responsible for the delayed realization of export proceeds; which were totally beyond the control of exporters; namely, (i) disruptions in global commercial transactional procedures due to Russia – Ukraine war (ii) extreme volatility in rupee – dollar parity; which experienced multiple rotational rounds of unexplained depreciation & appreciation (iii) inordinate delays in fulfillment of export orders due to delays in settlement of LCs of raw materials for the industrial production (iv) emergence of three simultaneous foreign exchange markets, i.e. banking channel, open market & grey market.

Mr. Irfan Iqbal Sheikh has demanded that all liens marked should be removed immediately and all fines should be reversed to free the hard-earned cash of the exporters; and, enable them to fulfil their export orders in hand. This is specifically important in the context of Pakistan’s prevailing conditions of unbearable cost of capital & access to finance in the backdrop of 21 percent key policy rate of the SBP; and, resultant hikes in interest rates of business loans from banking channels.

Brig Iftikhar Opel, SI (M), Retd.

Secretary General