KARACHI: Commodity importers and drug makers continue to face problems in opening letters of credit (LCs) for the import of raw materials and finished products because of a shortage of dollars in the interbank market.

All Pakistan Fruit and Vegetable Exporters, Importers and Merchants Association (PFVA) Chairman Mohammad Shehzad Sheikh told the Ministry of Commerce on Tuesday that 417 containers worth more than $5.4 million — 250 of onions worth $2.1m, 63 of ginger valuing $0.8m, and 104 of garlic amounting to $2.5m — were currently held up on various terminals of the Karachi Port.

The reason for the holdup is said to be the refusal by commercial banks to release documents because of the shortage of foreign exchange.

The inordinate delay in the clearance of vegetables will drastically increase their costs on account of terminal and shipping charges, Mr Sheikh said. As a result, consumers will have to pay higher prices, he added. He urged the ministry to take immediate notice of the situation.

Steel producers, drug makers say also facing problems in opening import LCs amid ‘shortage of dollars’

Steel sector in trouble

Pakistan Association of Large Steel Producers (PALSP) Secretary General Wajid Bukhari said on Tuesday members of the trade body are facing difficulties in opening LCs for the import of raw material as banks seem to have run out of dollars.

A statement quoted him as saying that the delay in LC opening and approvals from the State Bank of Pakistan (SBP) are hampering steel production.

Many steel mills are on the verge of closure because of the non-availability of raw material. Some companies have already cut their production drastically, he said, as the steel industry heavily relies on imported raw material.

Thanks to the delays by the SBP in LC approval and uncertainty in the currency market, steel makers are facing disruptions in industrial production as well as high demurrage and container charges, he said. The halt in production will result in higher inflationary pressure in the domestic market, Mr Bukhari said.

He said steel manufacturers are facing serious supply constraints. They fear they may be unable to meet the expected increase in demand for steel whenever construction activities restart in the flood-affected areas, he said.

The steel industry believes the problem, if left unresolved, may lead to an increase in the prices of steel bars to Rs230,000-240,000 per tonne, he said.

In the first four months of 2022-23, imports of iron and steel scrap remained at 890,971 tonnes and amounted to $494m, down 29 per cent from a year ago.

‘No raw material for drugs’

Meanwhile, drug makers also warned on Tuesday that with no opening of letters of credit for the import of raw materials, pharmaceutical companies would not be able to continue production after two weeks, which would lead to a serious shortage of medicines in the country.

The fresh warning came a day after the doctors’ bodies — the Pakistan Medical Association (PMA) and Pakistan Islamic Medical Association (PIMA) — raised alarms over the shortage of medicines in the retail market and asked the government to intervene and facilitate the pharmaceuticals so they could open the LCs for import of the raw material.

“My production line contributes supplies of at least two life-saving drugs in the country,” a senior executive of a local pharmaceutical company said. “I fear I would be stopping the production of most of my products after 10 or 12 days, as I don’t have stocks of raw material left and these two would be among them. It’s just one case. There are hundreds of companies which are facing the same crisis.”

With little more than 600 pharmaceutical companies operating in the country, most have left with only two-week production material after the SBP, according to the claim by the Pakistan Pharmaceutical Manufacturers Association (PPMA), had verbally conveyed to all local banks not to open LCs due to shortage of dollars.

“If LCs are not opened soon, it may result in medicine shortages because most of the pharmaceutical companies have only two months’ raw material available with them and they are unable to place orders for the raw material for the future,” PMA Secretary-General Dr Abdul Ghafoor Shoro said in a statement.

“If suitable measures are not taken to avoid a shortage of medicine in the upcoming days, we are scared that this situation will lead to black marketing and smuggling and eventually the prices of the medicine will go beyond the reach of the poor people,” he said.

Published in Dawn, December 7th, 2022