Business

Banking crisis on cards as Pakistan’s textile sector near brink of default

Published

1 year ago

Farwa

APTMA has asked for a Zoom meeting with top functionaries of SBP.
Commerce ministry says textile industry representatives may hold an urgent meeting SBP officials today.
APTMA says textile sector already running at less than 50% capacity.

ISLAMABAD: The textile sector has reached the brink of default in the wake of its inability to service the loans it received under TERF (Temporary Economic Refinance Facility) and LTFF (long-term facing facilities) which may also lead to a possible banking crisis, discloses the letter of APTMA to the State Bank of Pakistan written on February 27, 2023.

The State Bank of Pakistan (SBP) during the PTI era provided the TERF and LTFF facilities to help industrialists install more textile units for growth in exports of the country.

However, because of the ongoing LCs crisis, stuck-up consignments of imported cotton at the ports owing to the dollars liquidity crunch and withdrawal of RCET by the government in line with IMF diktat, all the new and expansion units in the sector have become non-functional. This has led to immense pressure on export-reignited units which are unable to generate funds to pay even interest on the loans, leading to massive defaults, curtailment capacity and a possible banking crisis.

The textile industry has asked the SBP to extend the moratorium on debt under TERF and LTFF from June 1, 2023, to December 2023 to avoid large-scale Non-Performing Loans (NPLs) and severe negative impacts on the banking sector.

The APTMA has also asked for a Zoom meeting with top functionaries of the central bank of Pakistan.

Banks are not opening LCs or retiring cotton imports, the letter says, which had led to the non-functioning of the textile units.

“Now loyal international customers are reluctant and asking Pakistani suppliers whether or not they will be able to meet deadlines and ship orders on time resulting in a loss of export orders. The industry is running out of cotton stocks and textile mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken.”

The textile sector also urged the SBP to declare the opening of LCs of cotton imports the status of “Must Open.”

The commerce ministry says that textile industry representatives may hold today (Monday) an urgent meeting with top mandarins of the SBP.

The commerce ministry’s top sources said that the prime minister convened meetings on export sector issues four times but the said meetings couldn’t be held mainly because of the premier’s pressing engagements.

The APTMA also mentioned that the business plan for new industrial units and expansion of the existing units had been carved out based on RCET (Regionally Competitive Energy Tariff) — electricity tariff of Rs19.90 per unit and gas rate at 9 cents per MMBTU.

However, with the withdrawal of RCET, the industry is forced to run on an electricity tariff of 40 per unit owing to which the textile sector has started dying out day by day.

The letter disclosed alarming facts saying that the textile sector is already running at less than 50% capacity. Around 7 million workers in the textile sector and textile-related industry were laid off since last summer and if this sector is closed down it will lead to more layoffs resulting in significant unemployment of more than 10 million workers and further deterioration in the balance of payments in the shape of at least $10 billion exports per annum.

The textile industry also highlighted in its letter the bleak cotton production in the country, saying that the country’s cotton production has declined to a historic low this year dropping to 5 million bales due to heavy rains and floods. The cotton production loss has been worth more than $2 billion.

The textile industry consumes nearly 15 million bales and the current season’s anticipated demand indicates that about 10 million bales will need to be imported. However, banks are not opening LCs for the import of cotton.

Business

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

8 hours ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

8 hours ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

9 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.