By Shahnawaz Akhter
KARACHI: The State Bank of Pakistan (SBP) on Tuesday unveiled a trade financing package worth Rs200 billion to help export industries overcome the challenges posed by a slowing economy.
Reza Baqir, governor SBP announced new measures for the export sector, increasing concessional financing for the exporter. The SBP will extend Rs200 billion loans for export oriented sectors under concessionary Long Term Financing Facility (LTTF) and Export Financing Scheme (EFS).
“Rs100 billion at concessionary rate had been allocated for LTTF for all exporting sectors,” Baqir said. The existing rate of refinance under LTTF is 6 percent for the end user. “The maximum limit of borrowing for an industry has been increased from Rs2.5 billion to Rs5 billion.” Governor Baqir, previously, emphasesd that the country needs a shift to an export-based economy to achieve high and sustainable growth.
The economy expanded 3.3 percent in the last fiscal year of 2019, the weakest annual pace in more than nine years, as exports – a key growth driver – had declined amid high cost of doing business and a strong rupee.
The government estimates economic growth to plummet to 2.4 percent, the slowest pace in over a decade, in the year started July. Governor Baqir said the SBP would announce another concessionary policy for small exporters.
“The business community is facing hardship due to changes in advance import payment… Considering their problems, advance payment restriction is eased and the central bank allowed 50 percent advance payment,” he added. “In the latest decision, the SBP allowed 100 percent advance import payment.”
Besides, related to import on open account basis, the SBP governor announced to include commercial importers in this regime. He said that the SBP received several representations from commercial importers to allow open account facility as allowed to other sectors of the economy.
The per project limit for LTFF has been increased by 100 percent to Rs5 billion to counter impact of rupee devaluation. The EFS limit meant for working capital has also been increased by an additional PKR100 billion. Amended foreign exchange regulations to support manufacturing sector.
Almost 100 percent of letter of credit amount can be made in advance for machinery, spare parts and raw materials. Importers other than manufacturers can import on behalf of manufacturers on open account. Pakistan’s exports of goods declined 3.96 percent year-on-year in December 2019 despite cash support and multiple currency depreciation. Exports clocked in at $1.99 billion in December, down 3.96 percent over $2.07 billion in corresponding month last year.
For the six-month period between July and December, exports edged up by 3.17 percent to $11.53 billion, as against $11.18 billion in same half last year. Analysts, however said the numbers are not commensurate with the level of cash support, concessions in utilities and multiple currency depreciations.