The trade and industry was all praise as the federal government Friday reduced the cost of bank borrowings for exporters. The 'welcome' move, as president FPCCI Mian Idrees called it, envisages a downward revision by 1.5 percent of the annual financing rates and services charges under the central bank's Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF).
The State Bank of Pakistan (SBP), through issuing two separate circulars Friday, slashed the financing rates under EFS from 7.5 to six percent and rates for services charges under LTFF from nine percent to 7.5 percent. Citing its earlier circulars of July 07, 2014, the State Bank said the revised rates would take effect from the 2nd of next month. "Banks' spread for corporate borrowers and SME borrowers would remain unchanged at one percent and two percent," a circular said.
The revised markup rate would also be applicable on outstanding loans granted under EFS, it added. "Banks are advised to re-price their outstanding loans granted under EFS," the regulator said. Simultaneously, it said, the SBP BSC offices would apply reduced markup on outstanding refinance loans granted under EFS. "In order to reconcile the position of re-priced loans, banks should submit particulars of outstanding loans re-priced by the bank under EFS on prescribed annexure-I to the concerned SBP BSC offices within 10 days from announcement of the circular," the SBP circular said.
The reimbursement of mark-up rate benefit to exporters, on excess performance under Part-II of the scheme, as specified in circulars of October 31, 2009 and 2014, would be adjusted accordingly keeping in view the revised mark-up rates. "It has been decided that mark-up rates for end users under SBP's Long Term Financing Facility... shall be 7.50 percent for a maximum period of financing up to 10 years," another circular told the banks and DFIs.
However, it said, the spread of Participating Financial Institutions (PFIs) shall remain the same at 1.50, 2.50 and 3.00 percent for financing up to three, five and 10 years, respectively, without changing 7.50 percent maximum rate for end users. The SBP's refinance rates would be adjusted accordingly for each term of financing, the bank said. Reacting to the incentive, President FPCCI Mian Idress said the 'welcome' incentive would boost the country's exports that annually fetch for the dollar-hungry country only $25 billion compared to its $40 billion imports. "It would make our exports competitive against the neighbouring countries where the exporters get rebates with cost of export financing ranging from five to six percent," the president said.
President KCCI Iftikhar Vohra said the decreased cost of bank borrowings would positively reflect on the country's exports in terms of competitiveness. "We would have more export orders," he told Business Recorder. Also, the trade representative said, the move would offset the adverse impacts of economic negatives like energy crises or frequenting strikes in this financial capital of the country.
The KCCI chief said there was a great demand on international market for Pakistan's textile, surgical, leather and other traditional products the exports of which would now see a definite upsurge. "We take most of the financing from the banks," he said. Explaining the positive, SBP chief spokesman Abid Qamar said the loan for exporters had been made cheaper by 1.5 percent under EFS and LTFF.
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