t least half a dozen members of Karachi’s business community severely criticised the role of the State Bank of Pakistan (SBP) in the ongoing crisis with regards to difficulty in opening letters of credit (LCs).
“At least tell the banks to open LCs for wheat and pulses so that people have something to eat,” one businessman pleaded to Jameel Ahmad, the SBP governor who paid a visit to the Karachi Chamber of Commerce and Industry on Wednesday. Earlier in the day, the SBP governor had also visited the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).
Zubair Motiwala, Chairman Trade Development Authority of Pakistan (TDAP), said data suggests that there has been a 25% to 30% reduction in industrial activity, gauging from the usage of electricity in the city.
“If we ascertain that by the usage of gas, it would be 50% but considering the shortage of gas in the country, it would not be the real picture. However, 25% to 30% certainly is.”
At least tell us how long it (resolving the LC issue) would take. Open it for an extended deferred period, 90 days or 120 days: TDAP chairman Zubair Motiwala to SBP governor Jameel Ahmad
He said that this is the case because of LC issues.
“The SBP must resolve it. At least tell us how long it would take. Open it for an extended deferred period, 90 days or 120 days.”
AQ Khalil, a former KCCI chairman, also symbolically offered the keys of the chamber to the governor, telling him to run the industry because it is currently unable to function.
Motiwala said the situation has become worse and there were around 6,000 containers stranded at the port. He said shipping companies have been left furious and “are threatening them that they would withdraw Karachi as one of the destinations”.
He said the cost of stranded containers in detention and demurrages was now exceeding the worth of the cargo in some cases. Meanwhile, some cargo with a short shelf life such as onions was rotting.
He added that even courier service provider DHL is irritated by non-payment.
The SBP governor assured the business community that the central bank would resolve their issues as much as it can.
While Ahmad asked the KCCI to share details about the stranded containers so that the issue could be sorted, the SBP governor also said things would not go back to the way they were unless the country’s current account issues are dealt with.
He further said that the State Bank has allowed IT exporters to retain 35% of their export remittances. Meanwhile, other exporters can retain 10% of their export remittances to spend on marketing and promotion of their products.
The governor said that they have been solving between 5,000 and 6,000 cases per month. They have resolved 33,000 since May 2022.
He said the central bank initially issued a priority list for imports but it will now review them in consultation with the business community.
He further said businesses should also import only after consultation with the banks.
He said the State Bank will also facilitate imports when the importer arranges financing from the supplier or some other source outside Pakistan. He said arranging dollars from within the country by the importer would not be allowed.
KCCI President Tariq Yousuf apologised to the SBP governor as one of the business leaders had earlier offered him keys of the KCCI to run the industry.