In order to discourage wheat hoarding, the banks have been directed to provide financing only to functional flour mills for procurement of wheat during 2008 season, the State Bank of Pakistan said on Thursday.
Although the private sector has been allowed to participate in procurement of wheat, its role is still evolving and needs to be closely monitored to prevent a repetition of the wheat-hoarding crisis that started during 2007, the central bank added.
The SBP said that an impression has been created by certain quarters that its decision to restrict bank financing to functional flour mills only may deprive farmers of appropriate price for their wheat. This impression is totally unfounded and to dispel this impression, it is clarified that the procurement of wheat is largely made by Pakistan Agricultural Storage and Supplies Corporation (Passco), and Punjab and Sindh food departments.
Extensive consultations were held with the Ministry of Food, Agriculture and Livestock (Minfal) and input was also taken from different references received from Pakistan Flour Mills Association on the adverse role of the non-genuine buyers of the wheat during wheat procurement season 2007.
The facilities to the private sector are in addition to the bank financing made/to be made available for the procurement drive of the government agencies and provincial food departments, who have been allowed by the government to avail bank financing to the extent of Rs 87 billion for the current year.
The State Bank will continue to monitor the performance of banks in providing funding facilities to private sector as per its instructions and ensure that the financing requests of eligible borrowers for procurement of wheat are not denied on flimsy grounds.
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