The State Bank of Pakistan and commercial banks have provided Rs 273 billion under the Export Refinance Scheme (ERS) to all eligible export-oriented sectors during the first three quarters of FY08.
The major beneficiary of EFS is the textile sector, which enjoys 65 percent share in overall disbursement, as a handsome amount of Rs 176 billion has been availed by this sector at 7.5 percent - lower than ongoing 6-month Karachi Interbank Offered Rate (Kibor) of around 10.32 percent.
Rupees 176 billion is equivalent to the amount provided to textile sector during the same period of FY07. The central bank on Tuesday informed that textile sector has also availed over Rs 4 billion as a long-term financing at 6 percent to 7 percent during the same period, which is even less than the ongoing EFS rates.
Moreover, the SBP has also sanctioned Rs 8 billion under its newly announced Long Term Financing Facility (LTFF) for disbursement to the textile sector during January-June 2008. During the period from FY03 to December 2007, the State Bank has provided refinance amounting to Rs 897.5 billion to textile sector under EFS.
Further, textile sector has availed refinance amounting to Rs 54 billion under Long Term Financing for Export Oriented Projects (LTF-EOP) Scheme since its inception in May 2004 to February 15, 2008 at a fixed rate of mark-up of either 6 percent or 7 percent for the full tenure of the loan which can extend up to 7-1/2 years.
The above-referred facts dispel an impression, created by a news item published in a section of the press, that the SBP Governor while addressing a meeting of Federation of Pakistan Chambers of Commerce and Industry recently had refused provision of financial assistance with low mark-up for textile industry.
Pursuant to release of the monetary policy statement for January-June 2008, the State Bank held many focused discussions with the stakeholders including FPCCI. During these meetings and discussions SBP explained that the monetary tightening was carried out to contain macroeconomic imbalances creating inflationary pressures in the economy.
As regards provisions of low mark-up financing to the textile industry, it is reiterated that textile sector has always been one of the major beneficiaries of the incentives provided by the SBP in the shape of its various schemes ie EFS, LTF-EOP, LTFF. The value-added sectors of the textile group remained the major beneficiaries of the refinance granted under these schemes.
In fact LTTF is available to value added sector including fabrics, garments, textile made-ups, towels, art silk & synthetic textiles and sub sectors of textile sector.