PBC urges SBP to allow import without prior permission
KARACHI: The Pakistan Business Council (PBC) has urged the State Bank of Pakistan (SBP) to allow the import of spare parts and other important instruments of essential and export-oriented industries without prior permission to keep the industries functional.
Recently, the State Bank imposed a condition on manufacturers to obtain prior permission from the SBP before importing spare parts and components. So far, hundreds of applications are pending with the SBP and waiting for approval from the regulator. The delay in approval is a big threat to the continued production including items of essential use such as food and pharmaceuticals.
As per the SBP’s EPD Circular 11 of July 05, 2022 Authorized Dealers are required to seek prior permission from the Foreign Exchange Operations Department (FEOD), SBP-BSC before initiating transactions for import of several goods, which list is issued by the SBP.
The PBC, which is composed of the country’s largest manufacturers and exporters, has acknowledged the reasons behind the issuance of EPD Circular 11 and suggested some ways to minimize both operational disruption and impact on the country’s foreign exchange reserves.
In a letter sent by Ehsan A Malik CEO PBC to Dr Murtaza Syed, Acting Governor SBP, the council has mentioned that several industries are facing difficulties due to inordinate delays in receiving permissions from the SBP.
In order to ease the difficulties being faced by manufacturers in operating their existing plant and machinery, the PBC has proposed that manufacturers operating in essential industries, such as food, agriculture-related, eg, fertilizer, or pharmaceuticals or those with active export orders, be exempt from complying with the provisions of EPD Circular 11 in respect of spares and instruments.
In addition, manufacturers in other sectors be allowed to import spares and instruments of a maximum value of US $100,000 in a three-month period without having to comply with the restrictions imposed by SBP through EPD Circular 11, it added.
Furthermore, the PBC requested the SBP to provide clarity to the manufacturers on the period for which they will not be allowed to import components required for production without prior permission and the time it would take to process such applications so that they can plan production and continued deployment of labor.
According to PBC, the manufacturing sector is crucial for employment as well as exports, and any facilitation provided to the sector will help reduce the current account balance. The PBC said that disruption of production would have a negative effect on tax revenue, cash flow and borrowing costs, in addition to the associated risk of loan impairment of the banking sector.
Industry sources said that there is an acute risk that industries would be shut and labor laid off, if immediate measures will not be taken to facilitate the essential industries for the import of spare parts and other instruments. Otherwise, the profitability of manufacturing and government’s tax revenues will be impacted.