LAHORE: An agreement between the State Bank of Pakistan (SBP) and the Central Bank of Iran will be signed soon, allowing Pakistani and Iranian traders to settle their claims through the two central banks, SBP Governor Ashraf Mahmood Wathra said on Friday.

Addressing the business community at the Lahore Chamber of Commerce and Industry (LCCI), Mr Wathra said trade with Iran is close to his heart, adding that he has been trying to promote it since his appointment. “The agreement between the SBP and the Central Bank of Iran will help boost the bilateral trade volume,” he said.

He noted that a cabinet committee has already approved the agreement.

The central bank is trying to curb money laundering, he said, but any new legislation raises a hue and cry among traders.

Mr Wathra said the credit-to-GDP ratio is correlated with the tax-to-GDP ratio in both Pakistan and India. It is around 11 per cent in Pakistan and 26pc in India. He said an increase in the credit-to-GDP ratio will automatically improve the tax-to-GDP ratio.

Mr Wathra said the SBP has imposed a new cash margin requirement on the import of selected consumer items because the country is spending around $8.5 billion to bring in goods that are nonessential in many cases and already being produced locally.

He said the 90-day late-payment limit for industries is not meant to label anyone as a defaulter. He added that the law for the establishment of credit information bureaus has been approved, which will improve the loan disbursement process.

The SBP governor said the economy has turned the corner because of supportive macroeconomic policies, successful completion of the International Monetary Fund (IMF) programme, sharp fall in oil prices and improvement in energy supplies.

He said interest and inflation rates were at their lowest levels, real GDP growth rate was 4.7pc for 2015-16 against 2.8pc in 2009-13, growth in remittances was 19.9pc in 2016 against 11pc in 2009-13, and budget deficit was down to 4.6pc in 2016 against 8.2pc in 2009-13.

Replying to a question, Mr Wathra said the SBP will monitor the issue of charity collection by Islamic banks. No one is willing to pay taxes on the one hand, but everyone criticises over-taxation on the other.

The SBP governor said trade with Afghanistan has become a big problem for Pakistan. “There was no banking system in Afghanistan and Pakistan has got no benefit of providing any trade facilities to Afghanistan”, Mr Wathra said.

Speaking on the occasion, SBP Deputy Governor Saeed Ahmed said the board of directors of Exim Bank has been established by the Ministry of Finance. He said the LCCI’s proposal regarding the representation of the private sector on the bank’s board has already been forwarded to the ministry.

LCCI President Abdul Basit said that access to credit should be made easier for the private sector. “Banks should be directed to allocate a specific part of their loan portfolios for the SME sector.”

He suggested that a separate credit rating agency for SMEs should be set up as only one organisation is currently working in this segment.

He said banks should be given access to the database of the Securities and Exchange Commission of Pakistan (SECP) and the Land Record Management Information System for online verifications.

Mr Basit said the advance payment limit for importers should be enhanced to $100,000 from existing $10,000 while the late-payment limit for industries should be increased to 180 days from existing 90 days.

Published in Dawn, March 4th, 2017