Covid-19 crisis: IMF says SBP disburses Rs238bn among 2,958 SMEs so far

ISLAMABAD: The State Bank of Pakistan (SBP) has disbursed Rs 238 billion among 2,958 small and medium enterprises (SMEs) so far to incentivise businesses and avoid laying off their workers during the coronavirus pandemic, says the International Monetary Fund (IMF).

The IMF in its updated report on "Policy Actions Taken by Countries" reviewed various steps taken by Pakistan since March to deal with the Covid-19 crisis.

It further stated that the daily new coronavirus cases have exceeded the 2,000-mark, and the positivity rate has been on an upward trend pointing to a second wave of virus.

As a result of the Covid-19 shock, the economic activity worsened notably, with growth preliminarily estimated at -0.4 percent in fiscal year 2020.

A gradual recovery is expected in FY 2020.

To mitigate a second wave, the authorities made it compulsory for all citizens to wear a face mask outside of their homes and have strengthened the enforcement of Standard Operating Procedures (SOPs). Smart lockdown measures have been also reintroduced.

These included lockdowns of selected hotspots in major cities, the closure of restaurants and shops by 10pm, and limits to the attendance in public and private gatherings.

The SBP has expanded the scope of existing refinancing facilities and introduced three new ones to: (i) support hospitals and medical centers to purchase Covid-19-related equipment (41 hospitals, Rs 7.99 billion, to date), (ii) stimulate investment in new manufacturing plants and machinery, as well as modernization and expansion of existing projects (240 new projects, Rs 186 billion, to date), (iii) incentivize businesses to avoid laying off their workers during the pandemic (2,958 firms, Rs 238 billion, to date).

Given their success, these facilities have been extended beyond their original deadline of June 2020 to September or December 2020.

Moreover, the SBP introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity.

These included: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent, (ii) increasing the regulatory limit on extension of credit to SMEs by 44 percent to Rs 180 million, (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent, (iv) allowing banks to defer clients' payment of principal on loan obligations by one year (with a total of Rs 654 billion being deferred to date), (v) relaxing regulatory criteria for restructured loans for borrowers who require relief beyond the extension of principal repayment for one year, and (vi) suspending bank dividends for the first two quarters of 2020 to shore up capital.

The SBP has also introduced mandatory targets for banks to ensure loans to construction activities account for at least five percent of the private sector portfolios by December 2021.

Copyright Business Recorder, 2020