Caretaker Finance Minister Dr Shamshad Akhtar on Thursday said enhancing exports is the only way for Pakistan to achieve sustainable growth.

Addressing the inauguration of The Export-Import Bank of Pakistan (EXIM Bank), Dr Shamshad said Pakistan’s balance of payment sustainability depends on innovation and diversity in the structure of the economy.

“Most of all, penetrating in exports, that is the only way for sustainable growth of Pakistan,” she said.

“To bring this fundamental shift, there is a need to remove anti-export bias, while the industry has to anchor itself on competitive principles. It shall transition from low technology to high technology,” she added.

Dr Shamshad also said the country needs to diversify its “excessive dependence” on the textile sector.

“Similarly, more than 50% of our exports rely only on four markets i.e. USA, EU, China and Afghanistan,” she said, adding that EXIM Bank would hopefully make a difference in diversifying the market.

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She said the operationalisation of the bank would facilitate exports to new markets and encourage the export of new products.

“The access to credit guarantees and insurance products to exporters will encourage them to target new markets for exports,” she said.

The interim minister stressed that the country must move away from industrial and export subsidies. “If they (subsidies) were good our industry and export growth would have been at a different level,” she said.

Launching bank no easy task

Dr Shamshad said that the launch of EXIM Bank was no easy task, “because there has never been an EXIM institution in Pakistan”.

“EXIM’s operationalisation is a proud moment and a major milestone for us. It will augment the banking and trade finance as we know. As it grows and matures it will shape Pakistan’s trade finance.

“It will promote principally through a proper institutional framework, which shall be backed by effective policy and regulatory framework,” said the interim minister.

Dr Shamshad was of the view that the bank needs to be accompanied by streamlining export policy frameworks further. “Together both will be able to contribute to the balance of payment sustainability, which in the past has been hurt by low levels of export earnings,” she added.

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The caretaker minister noted that EXIM if effectively managed along with the right policy and regulatory framework, has the potential to enhance Pakistani exporters’ competitiveness in the international markets by offering lending, credit insurance and guarantee services.

“Secondly, it can create a level-playing field for Pakistan’s exports vis-à-vis, competitors who already rely on their national EXIMS. It could facilitate access to wider global markets, enabling exporters to diversify their product portfolio and explore new avenues,” said Dr Shamshad.

She said that EXIM Bank would bring export insurance products, for the first time, in Pakistan. “EXIM would protect exporters against risk of credit-default of their foreign receivables.”

The caretaker minister said that the EXIM Bank must steer its operations keeping in consideration the need to balance export growth, risk diversification and mitigation needs of the export industry while managing the commercialization and financial viability of EXIM.

“In addition, the export-credit insurance products are designed for commercial banks, to protect these banks against the risk of credit default by ensuring that the export receivables, financed by the banks, are appropriately and on the timely basis available,” the caretaker minister said.

She said that for EXIM Bank to perform its role, it would need to attract a significant level of contingent risk capacity into the country from the international private sector reinsurance companies and other EXIMs and ECAs globally.

Public-private partnership

Dr Shamshad shared that the business model of EXIM is based on a public-private partnership.

She said that EXIM Bank would need to navigate itself to ensure reinforcement of its dual functions. “On one hand its core mandate is insurance. But the EXIM mandate has been expanded, to manage in a phased-manner export finance schemes,” she said.

“With this due mandate, EXIM will emerge as a single-window operation for the exporters, with a comprehensive range of products, incentives and services,” she said.

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Dr Shamshad said that the EXIM Bank’s success will depend on its ability to adapt international best practices.

She informed that in 2022, trade financing amounting to $2.5 trillion was disbursed by EXIMs globally.

Talking about the products offered by EXIM Bank, the interim minister highlighted that trade finance guarantees are an instrument, issuing these to commercial banks to provide financing for trade transactions can significantly increase the availability of trade finance for the SMEs.

Earlier in June, the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance that the primary objective of the Export-Import Bank (EXIM) Bank is to expand and diversify the export base of the country and mitigate the risks that local businesses face in international trade.

A brief put up to the committee by the SBP stated that the EXIM Bank will provide short-term export credit (pre and post-shipment) long-term financing guarantees, export credit insurance and other supporting services to the exporters under the regulatory authority of SBP.

Background:

The Export-Import Bank of Pakistan (EXIM Bank) is fully owned by the government and was incorporated on June 11, 2015, under the Companies Ordinance. 1984.

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Subsequently, on December 31, 2015, the government notified EXIM Bank as a Development Financial Institution (DFI) under the Banking Companies Ordinance (BCO) 1962 for the operationalisation of EXIM Bank, whereas, the Export-Import Bank of Pakistan Act 2021 was enacted in October 2022.

On February 13, 2023, the Finance Division notified EXIM Bank as a financial institution under BCO, 1962 and transferred the whole of the undertakings of EXIM Bank of Pakistan Limited to the new entity EXIM Bank of Pakistan through notifications.