KARACHI, Aug 3: The exporters sold $156 million outstanding export bills in July/May 2001/02 as the rupee kept on marching upward.
Bankers say that in July/May 2000/01 the exporters had held $172 million bills because the local currency had been on the slide.
The State Bank defines overdue export bills as those that have not been repatriated within 180 days or on due date of the bills whichever is earlier.
“The exporters refrained from holding outstanding export bills as the rupee remained stable,” says chairman of Pakistan Seafood Industries Association Sardar Muhammad Hanif Khan. “Earlier the exporters held overdue bills to limit the exchange rate losses.”
The US dollar declined 6.25 per cent in fiscal 2001-02 after recording a big rise of 18.6 per cent in 2000-01.
Bankers say the exporters still continue to sell overdue bills as the dollar has not shown any sign of recovery: In the first month of this fiscal year (July 2002) the dollar has fallen by 0.8 per cent in the inter-bank market. “Our estimate is that the overdue bills would continue to flow in into the market as long as the dollar remains weak,” says treasurer of a state-run bank.
But central bankers say that even if the dollar starts rising (the chances of which are remote for the time being) exporters cannot simply restart holding back overdue bills.
They say that the SBP has laid down strict rules to ensure that export bills do not become overdue adding that the exporters having overdue export bills can be denied concessionary export finance facility. But in cases where the export bills become overdue due to the reasons beyond the control of the exporters the banks may continue to offer export finance to them — after recording the reasons in writing. The SBP inspectors have the right to verify the genuineness of these reasons.
When the exporters sell overdue export bills into the inter-bank market it not only raises foreign exchange inflows for the time being and make the rupee stronger but also has a long term impact on the balance of payments. The inflow of $156 million through sale of over due export bills in July/May 2001/02 had a soothing impact on the capital account deficit that could have been a bit larger in the absence of this inflow: The deficit was contained at $1.6 billion during this period.
Historically the exporters have been blamed for having large overdue export bills at the cost of weakening capital account — and making the dollar dearer: In fiscal 1999/00 the overdue bills stood at $432 million and in 2000/01 these bills totalled $232 million.