PLGMEA asks for refinance rate to be capped
The Pakistan Leather Garments Manufactures’ and Exporters’ Association (PLGMEA) has asked the Governor of the State Bank of Pakistan (SBP), Dr. Ishrat Hussain, to cap the country’s export refinance rate at 4%. The SBP raised the export refinance rate from 8% to 9% on July 1 and the rate is now linked to the three-month weighted average yield of six -month Treasury Bills. It had previously been linked to the last month's yield of six -month Treasury Bills. The PLGMEA stated that the Export Refinance Scheme was no longer attractive to large exporters as they can obtain loans from banks at the same or even lower lending rates and that exporters do not have any incentive to apply for export refinance. This means that the small and medium sized exporters who rely on export refinance will suffer as they will now have to obtain export credit at a 9% interest rate.
The 9% rate applies only to new loans, existing loans are charged at the previous rates.
At present , the PLGMEA predicts that leather garment exports for the year 2004/2005 will amount to approximately $300 million, a decline of around 6% over 2003/2004. However, the association stated that it is optimistic that leather garment exports could be increased by at least 25% if the government reduced the export refinance rate to 4% and provide a 6% Research & Development support to the industry.
