Garment losses9 October 2002
The chairman of the Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA) Fawad Ejaz Khan has requested the Governor State Bank of Pakistan to give leather garment exporters some respite in their losses by freezing the mark up on export refinance loans for the period from September 2002 until August 2003. He said that many exporters were facing severe liquidity problems due to the major part of their cash flow being tied up in the payment of mark ups to the banks. The present mark up rate is around 8%. He claimed that many such factories have laid off many workers during the past two months and many more workers will lose their jobs in the future. The freeze of mark up will result in a cost saving to the exporters and they will be able to keep their workers employed. He said that situation had deteriorated due to the Ministry of Finance slashing the duty drawback rates with effect from July 2002 to 3.88% from 10.80%. A PLGMEA delegation recently met the Dr Ishrat Hussain, Governor, State Bank of Pakistan, to solve their banking problems. Dr Ishrat realised the gravity of the situation for the leather garments industry and immediately accepted PLGMEA requests. These were for an extension of the monitoring period for bringing foreign exchange from export proceeds back to the country from 180 days to 270 days and enhancement in the entitlement limit for obtaining loans for 67% of exports. He said that the exports of leather garments from Pakistan has registered a steep decline of over 25% from October 2001 to August 2002 (US$256 million) compared with the corresponding months from October 2000 to August 2001 (US$345 million). The decline in exports during July-August this year was over 36% compared with the corresponding period of last year. The decline in exports during August 2002 is 50% over August 2001.