KARACHI, April 12: Exporters discounted more than $100 million export bills on net basis in the first eight months of the current fiscal year and top bankers say the practice goes on as exporters anticipate further gain in rupee value.
The SBP statistics show that the stock of outstanding export bills stood at minus $101 million at end of February this year. This means that the exporters made a net discounting of $101 million export bills between July 2002 and February 2003. In a year-ago $192 million export bills stood outstanding. Or in other words $192 million export bills had fallen due between July 2001 and February 2002, but exporters were holding the same fearing a fall in the rupee value. Things have changed.
“In the past exporters delayed realization of export bills as they feared depreciation of the rupee. Now they sell export bills in advance anticipating that the rupee will rise further,” says former vice-chairman, All Pakistan Textile Mills Association, Mushtaq A. Vohra. Senior bankers say the practice goes on.
The rupee went up by around 3.7 per cent against the US dollar in the inter-bank market in the first nine months of this fiscal year, and bankers and economists believe it may rise further in days to come. The bankers say had the US attack on Iraq prolonged the upward journey of the rupee might have slowed due to soaring oil prices and problems facing exporters in marketing their products in the Middle East and beyond via Dubai.
But the war has been over now and oil prices are stable rather weaker than in the recent past. And exporters expect normalcy to return in export marketing business and war risk surcharges of shipping lines to be withdrawn or minimized. Besides, Pakistan has booked a huge $2.7 billion current account surplus in the first eight months of this fiscal year — and it may expand further on the back of rising home remittances and increased inflow of foreign direct investment. These things point toward a healthier rupee in future.
“That is why most exporters continue to sell export proceeds in advance,” says a senior executive of a state-run bank. So favourable is the perception about rupee that the US dollar has been selling on discount on forward counters for quite some time. Bankers say six-month forward dollar is selling up to a discount of five paisa over its ready value. Or the price of the dollar being purchased six months in advance is five paisa less than its ready value.
What makes the future of the rupee look even brighter is the fact that importers have not so far rushed to book forward dollars even at discounted rates. “The reason is we believe that the dollar will come further down,” says chairman of Pakistan Commodity Importers Association, Raees Ashraf Tarmohammad — making a reference to the fact that the SBP is still mopping up surplus dollars from the banks to keep it a bit stable for the exporters.
Small wonder then that most exporters have been selling export proceeds in advance to avoid exchange rate losses. The rise of the rupee has also provided the exporters with an incentive to bring in their age-old outstanding export bills that previously created a balance of payment problem. Bankers say this has become possible as the prospects for rupee’s health has brightened not only in short-term but also in long-term.
“Exporters do not see a point in holding export bills now because that means incurring exchange rate loss,” says treasurer of a major local bank. “Since most exporters anticipate continual rise of the rupee over the years to come — they have stopped allowing the current export bills to fall overdue — and have also realized those that had been lying overdue for years.”
Exporters normally sell their export bills in advance to raise rupee funds to meet day to day cash requirements, but recently they have found an extra advantage in doing so. Bankers say since the treasury bills rates have crashed many exporters discount the export bills and use the rupee funds so generated to clear their old expensive bank debts and secure new ones at cheaper rates.
They say this is all the more true in cases where bank loans were advanced on floating rates with the treasury bills rate serving as the benchmark rates. The exporters do not deny this, though they say only a limited number of exporters having access to credit lines of multiple banks are doing this. “Small and medium-sized exporters discount export bills only when they need rupee funds to finance production of goods meant for export,” says Mushtaq A. Vohra.
