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PRGMEA criticizes squeezing of EFS rates by SBP
17 Feb '12
2 min read
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has criticized the decision of the State Bank of Pakistan (SBP) to link Export Finance Scheme (EFS) rates with weighted average yields of last three auctions of six months T-bills.
Mr. Shehzad Salim, Central Chairman of PRGMEA, said the Government was taking back all the incentives that it had extended to the country's value-added textile sector. This would make it difficult for the export-oriented industry to withstand competition from other countries, he added.
Mr. Salim said, first, the Government discontinued the duty drawback of local levies and taxes (DLTL), wherein claims of exporters worth billions of rupees are still pending. He added that the latest SBP decision to squeeze EFS rates would further burden the Pakistani garment industry.
The PRGMEA chief said the EFS rates have not been lowered by the SBP since January last year, in spite of a decline in the interest rates.
He explained that the EFS rate is 10 percent at present with maximum 1 percent commercial banks' spread. Hence, there is hardly any incentive for exporters to avail the EFS facility as the key interest rate is 12 percent.
In the past, there used to be a difference of 3-5 percent between EFS and T-bills yield. However, the difference has now decreased to 1.8 percent, Mr. Salim said.
The issue was raised with the Finance Ministry in December last year, and we were expecting a downward revision of EFS rates, but the Government has not done anything so far, the PRGMEA chief said.
Mr. Shehzad Salim, Central Chairman of PRGMEA, said the Government was taking back all the incentives that it had extended to the country's value-added textile sector. This would make it difficult for the export-oriented industry to withstand competition from other countries, he added.
Mr. Salim said, first, the Government discontinued the duty drawback of local levies and taxes (DLTL), wherein claims of exporters worth billions of rupees are still pending. He added that the latest SBP decision to squeeze EFS rates would further burden the Pakistani garment industry.
The PRGMEA chief said the EFS rates have not been lowered by the SBP since January last year, in spite of a decline in the interest rates.
He explained that the EFS rate is 10 percent at present with maximum 1 percent commercial banks' spread. Hence, there is hardly any incentive for exporters to avail the EFS facility as the key interest rate is 12 percent.
In the past, there used to be a difference of 3-5 percent between EFS and T-bills yield. However, the difference has now decreased to 1.8 percent, Mr. Salim said.
The issue was raised with the Finance Ministry in December last year, and we were expecting a downward revision of EFS rates, but the Government has not done anything so far, the PRGMEA chief said.
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