100 percent export refinance to be provided

In order to further facilitate exports, the State Bank of Pakistan (SBP) on Wednesday announced willingness to provide 100 percent financing to banks, under Export Refinance Facility Part-II (ERF) and Long-Term Financing Facility, which will inject an additional amount of Rs 39.5 billion into money market.
Earlier, the SBP was only financing 70 percent under ERF, while the remaining liquidity was provided by banks themselves. The central bank has already released close to Rs 270 billion through lowering of reserve ratios and around Rs 10 billion by providing 100 percent refinancing to banks under Part I of EFS to meet the growing working capital financing requirements of the exporters.
SBP Governor Dr Shamshad Akhtar, presenting the monetary policy, announced that to provide more liquidity to the banks, the central bank would provide 100 percent finance against Part II of EFS and Long-Term Financing Facility (LTFF) to promote real investment in the country.
This would inject an additional amount of Rs 39.5 billion into money market, making the cumulative size of liquidity comfort provided to commercial banks to Rs 319.5 billion. These measures, aimed at accommodating exceptional liquidity requirements of the banking system, must not be construed as a change in the SBP's monetary policy stance, she added.
She said that active and calibrated liquidity management was part of a prudent monetary management necessary to ensure effective monetary transmission mechanism which is critical to achieving financial as well as overall macroeconomic stability. In addition, flexible application of reserve ratios and open market operations helps effective monetary management.
Export finance, already provided by banks under Part-II of EFS from own sources at the ratio of 30 percent and outstanding as on date of issuance of the present circular, would be refinanced by the State Bank for the remaining period of individual loan.
The central bank has asked the banks that they should approach the respective field offices of the SBP along with a list of cases under the Scheme for release of refinance against their share of 30 percent for the remaining period.
Banks will henceforth not be entitled to deduct the funds provided under both parts of the Scheme from their Time and Demand Liabilities determined for the purpose of computation of both Cash Reserve Requirement and Statutory Liquidity Requirement.
As the funds under EFS are provided to the exporters at substantially lower rates when compared with the market rates, banks have been strongly advised to ensure legitimate utilisation of these funds for increasing exports of the country, the SBP said in its circular regarding ERF.