Banks' outstanding under Export Refinance Scheme (EFS) declined to three-year low level of Rs 192 billion at the end of calendar year 2011 mainly due to State Bank's condition with regard to overdue export proceeds and decline in cotton prices. Although, the State Bank continues to facilitate financing of export-oriented projects both through short-term and long-term financing with the objective to promote exports and long term investment in the country, some decline has been witnessed in the outstanding stocks of EFS during CY11.
According to SBP's "Development Finance Review", during 2011, under EFS the overall limits allocated by SBP to banks were Rs 253.6 billion, however, at the end of 2011, the outstanding banks' financing under EFS have declined by 7.6 percent to Rs 192.4, which is lowest during the last three years as outstanding of bank's under EFS stood at Rs 208 billion at the end of calendar year 2010.
The outstanding amount at the end of CY11 is also lower than the CY09, in which banks' outstanding under EFS stood at Rs 198 billion. According to SBP, this decline may be due to imposition of maximum overdue export proceeds condition for availing EFS facility and decrease in cotton prices during 2011. This decline is also reflected in financing under EFS to textile sector (the largest beneficiary of EFS) which decreased by 14.0 percent during 2011 on YoY basis.
As on December-11 the total number of borrowers under Export Finance Scheme (EFS) stood at 1,482 with an average loan size of Rs 130 million. Public sector banks' outstanding moved up by 20 percent to Rs 14.1 billion at end of CY11 compared to Rs 11.7 billion in CY10. Outstanding of private and foreign banks declined by 10.4 percent and 17.6 percent to Rs 161.7 billion and Rs billion, respectively, during the period under review.
However, Islamic banks registered a healthy growth of over 37 percent to Rs 8 billion at end of CY11 from Rs 6.3 percent in CY10. The commodity-wise outstanding financing, analysts revealed that despite a decline of 14.4 percent textile sector is the major beneficiary of EFS with Rs 111.4 billion outstanding at end of December 2011.
Textile sector has a share of 58 percent in total outstanding. Edible oil is at second place with Rs 31.2 billion outstanding. Leather goods' outstanding under EFS stood at Rs 11.6 billion, machinery Rs 1.4 billion, metal products Rs 2.7 billion, carpet Rs 1.4 billion, sports goods Rs 2.4 billion and other commodities Rs 3.03 billion at end of last calendar year.
To emphasise on repatriation of export proceeds and discourage any practice of deliberately holding foreign exchange abroad, the SBP introduced a new mechanism for availing financing under EFS by imposing a condition of maximum overdue exports proceeds as 5.0 percent of last year exports for any exporter. If overdue export position of an exporter is greater than 5.0 percent of the previous year export performance, the exporter would not be entitled to avail the EFS facility effective 1st October, 2011 till such time that the overdue position is reduced to the 5 percent benchmark level.