The Letter of Credit hurdles are not only impeding our economy but it has grown into a worst financial crisis as is evident from the current economic situation. To be very specific, the opening of Letter of Credit is taking a toll on our industries and is affecting our businesses in one way or another other as such Financial Minister Ishaq Dar must give serious attention to this issues before it is too late.

All the importers and exporters and other stakeholders are making hue and cry over this adverse situation as they are unable to meet their production targets and the local demands as well due to lack of various facilities including the crisis in Letter of Credit etc. Like other sectors, the PSMA members are also hard hit by the situation. That’s why the Chairman of Pakistan Soap Manufacturers Association (PSMA) Syed Anwer Suhail Razvi has termed it as the worst financial crisis, with which the entire Economy of the Country in the grip as the Letters of Credit and retirement of documents is not being honored by all commercial

Banks, causing rapid deteriorating Stock availabilities. One would agree with Razvi as the situation is very gripping and has set the alarm bells ringing for the soap manufacturers as well. If such situation prevails further, there will be an acute shortage of the basic commodities very soon in the entire country. It is worth noting that it will take minimum of three months for the restoration of supplies on the shelves, once the available stocks are finished.

While voicing his concern over the prevailing Letter of Credit and other crises, Suhail Razvi said that PSMA is one of Pakistan’s oldest and most well-established trade associations, which represents Pakistan’s leading FMCG companies engaged in manufacturing various international and local brands of anti-bacterial and beauty soaps, hygiene and allied products. Soaps have proven to be one the most effective tool for protection against the spread of COVID19 virus.

One would definitely agree with him as Soap is a very basic and essential commodity for every citizen of Pakistan to wash their hands regularly and take bath to protect themselves against many diseases; in particular, the new variants of Covid-19, which is again spreading in country.

Thus, ensuring the continuity in supply chain of soap across the country is as important as medicines and other essential products. Soap industry is playing its parts in exports. There has been a substantial surge in exports of soap and allied products during the year 2022. The industry is forced to stop these due to the stoppage of new LCs and the existing stocks are not enough to cater to domestic demand for more than a few weeks. According to an estimate, 90% of the raw materials used in the soup industry are imported from other countries, as Mr Razvi observed. In view of the above facts, one would strongly urge Finance Minister and Governor State Bank to please intervene in the situation and extend the maximum possible support for the import of the following two basic oils/oil derivatives: Palm Stearin HS Code 1511.9010 (Monthly Demand is 12,000 MT) & Lauric Acid HS Code 2915.9000 (Monthly Demand 1,500 MT) These both Raw Materials cost US$ 12-15 million. Many Soap Raw Materials including Fragrance should be considered for the opening of L/C & retirement of its documents.

And last but not the least, the Chairman PSMA has also demanded of the State Bank of Pakistan immediately issue orders to all commercial banks to open immediate LCs for imports and exports, otherwise local industries will be destroyed and unemployment throughout the country will increase many times.

As a matter of fact, soap industry is already in crisis since the corona pandemic when the world economy was jolted by it, with smaller economies like Pakistan badly hit among the Asian countries.

Right now a recession-like situation is prevailing all over the world as the global economic meltdown is still continuing. The higher energy prices and commodities prices as well are badly affecting businesses around the world.

In Pakistan, the summer floods which were unprecedented in nature have also severely affected our economy and have resulted in higher prices of raw materials as well. The highly inflationary trends and the rupee's massive depreciation against the US dollar and higher production cost for the manufacturing units have been adding to the woes of the industry people, who are running from pillar to post to save their businesses which are deep in water due to economic meltdown.

In such a situation, the crisis regarding Letters of Credit can prove the last nail in the coffin of our industrial sectors. One would appeal to the current coalition government, especially Finance Minister Muhammad Ishaq Dar, to come to reassure of importers and exporters and give special attention to the Letter of Credit crisis so that our industry people including the PSMA members can take a sigh of relief.

Published in The Daily National Courier, January, 19 2023

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