LAHORE, Aug 26: The government is bringing bankruptcy laws as are prevalent in the developed countries to provide procedures to defaulters to file for bankruptcy.
This was stated by the State Bank Governor Dr Ishrat Hussain while answering questions of businessmen at a briefing organized by the All Pakistan Textile Mills Association (Aptma) here on Tuesday on the country’s textile sector. The briefing was organized for Federal Finance Minister Shaukat Aziz and himself.
Dr Hussain said the “banks had been in a habit of indulging in window dressing in the past years to report fictitious profits by levying compound interest on the principal amounts.”
By showing what he described as “paper profits”, the banks had not only worsened their financial position but had also “ended up paying high taxes on them.”
He said the bankruptcy laws would provide credit protection to the borrowers.
Replying to a question, the governor said the “banks had been doing project financing in the past that was why they had lost Rs250 billion.” He did not agree with a suggestion that the country’s banking laws were highly flawed and hampering fresh investment. He said the private sector had borrowed Rs154 billion during the last year, which would not have been possible if the laws were as flawed as the questioner had tried to paint them.
SBP body: Answering another question about the BPD-29, he said he had delegated his authority as governor of the central bank to the SBP dispute resolution committee comprising bankers and business representatives. He said he had set up the committee to put in place a transparent mechanism for borrowers and bankers to make use of the loans write-off scheme given to clean up the nonperforming portfolio of the banks. He said he could not look into individual cases. “It is for the committee to look into these cases.”
He had earlier told the businessmen at the Lahore Chamber of Commerce and Industry that the decisions of the committee were binding on the banks. He, however, added the decisions of the committee were being implemented by the banks. He said the banks had been asked to settle the cases applied under BPD-29 by August 31. He ruled out extension in the deadline.
He had also said that the central bank had already issued a notification to direct the banks to issue working capital and finance BMR of the projects whose accounts were settled under BPD-29.
FINANCE MINISTER: Speaking to Aptma office-bearers and senior members, finance minister Shaukat Aziz assured continuity and consistency in government economic policies. He said the textile sector was the backbone of the country’s manufacturing sector. He was happy to note that the textile industry was prepared to face the challenges of global market in the post-WTO era and compete with other players in the international market. He said the textile exports could be increased to $13 billion by 2006 as projected by Aptma. “I am certain that you can do even better.”
He said the growers must grow more cotton and improve their quality to meet the requirements of the domestic industry whose consumption is projected to be 12 million bales this year as against the estimated crop production of 10.5 million bales.
He also promised to facilitate direct import of Central Asian cotton via Afghanistan that would reduce the import cost of the industry. At present, the industry is importing cotton from Central Asia via Iran which adds up to their cost.
The minister said the Central Asian states like Uzbekistan were prepared to sell their cotton directly to the Pakistani businessmen provided the government signed an MoU with them.