In order to facilitate exporters, the State Bank of Pakistan (SBP) has enhanced the limit of refinancing provided to banks by an additional Rs. 190 billion to be availed by exporters for various dedicated schemes.
Accordingly, the refinancing limit under the Exports Finance Scheme (EFS) surged by Rs. 100 billion to stand at Rs. 700 billion for exporters for FY21. Moreover, to promote export-oriented investment, Rs. 90 billion have also been allocated additionally under Long Term Financing Facility (LTFF) for FY21. This amount is in addition to the limit of Rs. 100 billion already allocated to banks/DFIs under Temporary Economic Relief Facility (TERF) – a concessionary refinance scheme for setting up industrial units.
Export Finance Scheme and Long Term Financing Facility are two of the oldest schemes of SBP under which concessionary financing is provided to the exporters. EFS is operational since 1973 to meet short term financing needs of exporters, while LTFF has been available since 2008. For both the schemes, their Shariah-compliant versions are also available.
Since the emergence of COVID-19, SBP has taken several measures to counter its impact on the economy and safeguarding the country’s exports has been a key priority. SBP has provided a number of relaxations under EFS and LTFF since March 2020 including:
- An additional period of six months for making shipments against loans availed under EFS Part-I.
- An additional period of six months for meeting required export performance against loans availed under EFS Part-II. The export performance of this extended period will also be considered for calculating the entitlement limit for FY21.
- Reduction in showing export performance from 2 times to 1.5 times against financing availed during FY20 and FY21.
- Relaxation in the eligibility criteria for availing finance under LTFF.
- Allowing deferment of the principal amount for one year and/or rescheduling/restructuring of loans under LTFF.
It is expected that with the above relaxations, which were widely appreciated by the business community, the enhancement of around Rs. 190 billion in limits will cater to exporters’ cheaper liquidity requirements. SBP is closely monitoring the situation and is ready to take any further actions as required to support the export sector.