Rate of refinance up at 9%

SBP revises the refinance rate under the Export Finance Scheme, increasing it by 50 basis points.

KARACHI: The State Bank of Pakistan (SBP) revised the refinance rate under the Export Finance Scheme, increasing it by 50 basis points to nine per cent per annum.The previous refinance rate was 8.5 per cent.

The new rate will take effect from October 1.

In a circular issued on Thursday, the SBP said that banks can charge a maximum margin of one per cent on financing facilities provided to exporters.

Export refinance is a concessional financing facility designed by the central bank to help exporters compete in the international market. The central bank hiked the rate after raising its benchmark policy rate by 50 basis points to 13.5 per cent on Wednesday.

The SBP said that financing facilities under Part B (export sales) of the Export Finance Scheme for financing locally manufactured machinery will have the same rate structure — nine per cent.

Reimbursement of mark-up benefits to exporters on excess performance will also be adjusted accordingly in accordance with the revised mark-up rates.

According to the Quarterly Performance Review of the SBP for June 2010, financing under the Export Finance Scheme declined from its peak of Rs198 billion in December 2009 to Rs193 billion in March 2010 and stood at Rs186 billion at the end of June.

Separately, the SBP also revised refinancing rates under the Long-term Financing Facility upward by 70 basis points. This will also take effect from October 1.

For loans of up to three years, the refinance rate will be 9.5 per cent with a spread of 1.5 per cent for banks. This takes the end user rate to 11 per cent.

For loans with durations ranging from three to five years, the refinance rate will be 8.6 per cent with a bank margin of 2.5 per cent and for loans with durations varying from five to ten years the refinance rate will be 8.2 per cent with bank margin of three per cent.

Published in The Express Tribune, October 1^st, 2010.