KARACHI: Business leaders have criticised 0.5 per cent increase in export refinance rates by the State Bank from Nov 1, and said that it would hit the industrial sector.

The industry believes that it had been done to meet IMF’s conditions, but it would have a negative impact on economy as a whole.

SITE Association of Industry chairman Salim Parekh said that the hike had taken place at a time when high season for apparel exports and receiving of orders was under way.

He felt that symptoms of recovery in textile sector would fade away as exports would become costlier with equal margin and it would further erode exporters’ competitiveness in the world market.

Mr Parekh said value-added sector was already facing problems due to higher prices of yarn and its shortage, therefore increase in the interest rates would further aggravate their problems.

He said that so far the textile ministry has not implemented any of the promises made in the textile policy announced on Aug 31, as no SRO or notification had been issued.

Above all, the SITE chief said a huge paid-up balance of research and development support to exporters has not been paid which has created a liquidity crunch, badly needed to meet future export commitments.

Pakistan Leather Garments Manufacturers and Exporters Association’s founder chairman Fawad Ijaz Khan said with an increase in the interest rate export of leather goods would badly suffer because exporters are presently entering into deals with importers for spring 2010 season.

Similarly, he said sampling is being made for the next winter for which buyers have also started holding meetings with exporter in third country.

The leather garment made-up sector, he said that, is also faced with raw material shortages because of on-going war in Afghanistan from where sizeable quantity of hide and skins are imported.

Pakistan Bedwear Exporters Association chairman Shabir Ahmed said if the government keeps on fulfilling IMF conditions, it would ultimately destroy country’s industrial base.

He said the theory of withdrawal of all sorts of subsidies from electricity and finance, etc., would ultimately make our products costlier in the world market because all these decisions add up to the cost of production.

He asked the minister of textile industry that if the commitment of not increasing interest rates in the textile policy were not meant to be implemented, why it was announced in the policy.

Mr Shabir said by making exports costlier, the country is only going to borrow more from IMF and would also increase its dependence on external assistance.