New mark-up rates to attract exporters

KARACHI: The State Bank of Pakistan has introduced performance-based mark-up rates under the Export Finance Scheme to incentivize exports and provide relief to exporters.

The bank wants to try and get traders to export in excess of the requirements.

This was said by Muhammad Kamran Shehzad, Deputy Governor, State Bank of Pakistan in Sialkot on Tuesday.

The SBP has switched back to 100 per cent refinancing under its Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF). This is to provide banks with liquidity and allow exporters easier access to credit at lower interest rates.

Shehzad said that the central bank had taken a number of initiatives to facilitate industrial growth through export promotion and that it was ensuring availability of adequate credit to the private sector to promote economic growth on sustainable basis.

The SBP has issued prudential regulations for banks which provides for credit and risk exposure limits and guidelines relating to classification of loans, said Shehzad. He said an extension was also allowed in the repayment period under Part-I of EFS from 180 days to 270 days for exporters who availed financing up to 85 per cent of the contract value.

Besides, shipment period under EFS Part-I was extended to 180 days for exporters with shipment falling due in FY09, he said and added that waiver to avail export finance up to end-June 2010 was allowed to exporters having overdue proceeds.

Shehzad said that mark-up rates under the Export Finance Scheme were linked with the weighted average yields on sixmonth treasury bills. The existing six-month T-bill rate is around 12 per cent.

However, the rate was fixed at 7.5 per cent since July 14, 2006 so that the exporters may remain competitive in international markets, he said.

“Presently, the rate is 9 per cent, which is still much lower than the rate as per prescribed criteria,” Shehzad added.

Highlighting the salient features of the Long Term Financing Facility, he said a grace period of one-year was allowed in repayment of principal amounts.