SBP to finance import of used plant, machinery

In order to facilitate the under stressed industry and to increase industrial growth, the State Bank of Pakistan on Wednesday announced to finance the import of second hand plant and machinery under Long Term Financing Facility (LTFF). Now, exporters and Small and Medium Enterprises (SMEs) can get financing at 8 percent for the import of second hand plants and machinery till December 31, 2009.
Earlier, the facility was exclusively for the new imported and locally manufactured plants and machinery, however the SBP has now extended the scope of LTFF for used imported plant and machinery to support the industry. The countrys industrial growth is continuously on decline due to the high interest rate and some 5 percent decline has been witnessed in the Large Scale Manufacturing (LSM) during the first half of current fiscal year.
As the import of new plant and machinery has become more expensive, exporters were demanding financing for the import of used machinery and plant under the LTFF as well. During last 14 months the SBP has got positive response from exporters and SMEs and the outstanding amount under this head stood at Rs 4.5 billion.
Exporters and SMEs can now avail this facility for plants and machinery, which will not be more than three years old. The SBP amending the MFD Circular No 07 dated December 31, 2007 has advised banks and DFIs that henceforth second hand plant & machinery to be used in the eligible sectors or sub-sectors of LTFF scheme would also be eligible for financing under the scheme subject to some terms & conditions.
The SBP said that only imported second hand machinery not more than three years old would be qualified for financing under the scheme, however the facility would not eligible for the second hand machinery purchased from local suppliers. "Fixed term loans extended by banks/DFIs against second hand imported machinery prior to the issuance of this circular will not be eligible for refinance," the central bank added. As per conditions the useful life of such machinery should be more than the period of loan itself, while letter of credit (LCs) established from the March 11, 2009 to December 31, 2009 would be eligible for refinancing.
The borrowers concerned should submit a report from PBAs approved surveyors (acceptable to bank/DFI concerned) with regard to confirmation that the machinery is in order and its useful life is more than the period of loan itself, the SBP circular added.
However, it said that banks and DFIs can avail refinance for a maximum period of three years, to the extent of value of such machinery determined by the approved surveyor; or original cost less accumulated depreciation @ 10 percent p.a., whichever is lower.