The State Bank of Pakistan (SBP) has increased the limit of refinancing provided to banks under the Exports Finance Scheme (EFS) by Rs100 billion to facilitate exporters.
Banks will now have an overall limit of Rs700 billion for exporters for the fiscal year 2021.
The SBP has allocated Rs90 billion under its Long Term Financing Facility (LTFF) for the year to promote export-oriented investment. It had previously allocated Rs100 billion to banks under its Temporary Economic Relief Facility (TERF)--a concessionary refinance scheme for the setting up of industrial units.
EFS and LTFF are two SBP schemes under which concessionary financing is provided to exporters. EFS has been operational since 1973 to meet the short-term financing needs of exporters. The SBP started the LTFF in 2008. Both schemes also have Shariah compliant versions.
The SBP has taken measures in its capacity to counter the COVID-19 pandemic’s impact on the economy and safeguarding country’s exports.
It has also granted relaxations under its EFS and LTFF schemes since March 2020 when the lockdown began including deferment of principal amount for one year and rescheduling and restructuring of loans under the LTFF.
“SBP is closely monitoring the situation and is ready to take any further actions required to support the export sector. It is expected that with the relaxations and increased limit, it will cater to exporters’ cheaper liquidity requirement,” SBP said.
The need of cash for businesses to pay salaries, clear supplier bills or run their day to day affairs is called liquidity requirements. The businesses struggled with availability of cash or liquidity during extended lockdowns as they fail to sell or export as much as usual.