The President of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Irfan Iqbal Sheikh, has called on the State Bank of Pakistan (SBP) to immediately discontinue the practice of commercial banks and Authorized Dealers charging 3 to 9 percent in foreign exchange fines or lien-marking on exporters’ accounts for unfounded but deemed delays in the realization of their export proceeds.
Sheikh argues that this practice discourages exporters from bringing their earnings back home, resulting in unbearable financial losses. Authorized Dealers deduct 3 percent fines or mark lien on the amount of export proceeds delayed by up to 30 days, 6 percent on those delayed by more than 30-60 days, and 9 percent on export payments received with a delay of more than 60 days.
Although the SBP has issued a circular on April 30, 2023, instructing commercial banks and Authorized Dealers to exempt genuine cases of delay in the realization of export proceeds from fines and lien-marking, Sheikh notes that these directives have not been implemented in letter and spirit.
The FPCCI Chief highlights that it is surprising that exporters’ documentation or their foreign buyers are not given due weightage, and Authorized Dealers are making ill-informed and misinterpreted decisions, resulting in undue deductions on export proceeds of already distressed and burdened exporters of Pakistan.
Foreign exchange is the lifeline of Pakistan’s economy, and exporters need to be facilitated and incentivized for bringing dollars inward, rather than being slapped with unfair and illegitimate fines, says Sheikh.
SVP of FPCCI, Suleman Chawla, explains that there have been a number of genuine impediments responsible for the delayed realization of export proceeds, such as disruptions in global commercial transactional procedures due to the Russia-Ukraine war, extreme volatility in rupee-dollar parity, inordinate delays in fulfilling export orders, and the emergence of three simultaneous foreign exchange markets.
Sheikh has demanded that all liens be removed immediately, and all fines be reversed to free exporters’ hard-earned cash and enable them to fulfill their export orders. This is particularly important in the context of Pakistan’s prevailing conditions of an unbearable cost of capital, limited access to finance, and resultant hikes in interest rates of business loans from banking channels due to the 21 percent key policy rate of the SBP.
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