KARACHI (November 06 2008): The State Bank of Pakistan on Wednesday announced to provide 100 percent refinancing to banks under Part-I of the Export Finance Scheme (EFS) to provide more liquidity to banks for export financing. Sources said that the SBP move would inject some Rs 25-27 billion liquidity in the banking system, enabling them to provide more financing under the EFS, while if the central bank completely finances the EFS, than some Rs 47 billion would be injected into the system.

State Bank Governor Dr Shamshad Akhtar announced that the central bank will henceforth provide 100 percent refinancing to banks against export finance provided by them to exporters under Part-I of the EFS. Earlier, the SBP was providing export finance to banks up to 70 percent, while remaining 30 percent was from banks from their own resources.

Export finance already provided by banks under Part-I of EFS from own sources at the rate of 30 percent and outstanding as on 31st October, 2008 shall also be refinanced by the SBP for the remaining period of individual loans, the governor said.

In order to ensure adequate flow of credit to exporters, the SBP has taken various initiatives. At the beginning of the current financial year, the SBP Governor had increased banks' limits under EFS by 25 percent to fulfil the credit need of exporters.

However, it was observed by the SBP that various banks were facing difficulties in providing financing facilities to exporters due to exhaustion of limits under the Export Finance Scheme and increasing requirement of credit due to exchange rate depreciation.

Copyright Business Recorder, 2008