KARACHI: Stern action is being taken against those who have committed irregularities in external trade by drawing more than the approved foreign exchange for imports and made short remittances against exports, said State Bank of Pakistan Governor Ashraf Mahmood Wathra on Thursday.

Addressing a meeting at Federation House, the SBP governor said during the last two years many cases were detected wherein importers received payments of foreign currency thrice against a single import shipment and exporters remitted only one tranche of foreign exchange against two or three export shipments.

Mr Wathra went on to say, “Some of those who committed these irregularities are even present in this hall.”

In response to some of the issues raised by Dr Mirza Ikhtiar Baig, the SBP governor said, “Everywhere in the world, the mark-up rate for big projects is negotiated and the same will be applicable for China-Pakistan Economic Corridor (CPEC) projects.”

“If there is any difference in the interest rate of Pakistani and Chinese banks, the rate will be jointly fixed because some loans could be expensive and others cheaper,” he added.

He said currently Pakistan’s discount rate was at 40-year low.

He clarified that besides local investors Chinese companies would be looking for finance.

The State Bank will facilitate all CPEC projects for which different financial plans are being worked out. The governor did not agree that private sector is being crowded out by huge government borrowings from the credit market.

Presently the credit demand from private sector is being fully met and in case there is more demand, the State Bank could increase open market operation (OMO) to create more liquidity and space, he added.

On the textile sector, he said that it did not upgrade its technology during its good days but still the SBP will fully support textile projects up-gradation.

Referring to the monetary policy, he said, the discount rate was reduced by 320 basis-points and there is a surge in credit demand because many big projects are being simultaneously executed.

The governor disagreed that consumer financing was diverting funds from industry. “It is consumers who generate demand for industry,” he commented.

With regard to SMEs, he said during last 10 months their growth has been tremendous and assured to continue to support small and medium enterprises.

The fact is, he said, that for last five decades private sector investment in India, Bangladesh and Sri Lank has been very high. “However, it’s also true that profit margin is higher in Pakistan than all these countries,” he added.

Published in Dawn, March 25th, 2016