SBP raises rates of two financing schemes: IMF condition fulfilled

The State Bank of Pakistan (SBP) on Friday raised the mark-up rate/services charges up to 1.5 percent for long-term Financing Facility (LTFF) scheme, and the Scheme for Financing Power Plants Using Renewable Energy with immediate effect.
The State Bank has revised the rates of service charges/mark-up for banks/Development Finance Institutions (DFIs) and rates for end users under the LTFF Scheme and the Scheme for Financing Power Plants Using Renewable Energy with effect from July 1, 2011.
According to SBP circular IH&SMEFD No 06, issued on July 1, 2011, about 1.5 percent has been raised on LTTF scheme and now the rates of refinance under LTFF Scheme will be 11.00 percent for financing up to 3 years. Previously it was 9.5 percent. With the increase of 1.5 percent, the mark-up rate has been fixed at 10.10 percent for over 3 years and up to 5 years, while mark-up of 9.70 percent has been fixed for over 5 years and up to 10 years'' financing.
Besides that, Participating Financial Institutions'' (PFIs) spread for these tenors will be 1.50 percent, 2.50 percent and 3.00 percent respectively. Hence, the end users'' rate for these tenors will be 12.50 percent for up to three years financing; 12.60 percent for over 3 years and up to 5 years; and 12.70 percent for over 5 years and up to 10 years'' financing, according to the circular.
In addition, in a separate circular IH&SMEFD No 07 of July 1, 2011, the State Bank has announced to raise the rate of Scheme for Financing Power Plants Using Renewable Energy. The rates of service charges under the Scheme for Financing Power Plants Using Renewable Energy have been increased by 0.20 percent and it has been re-fixed at 10.10 percent for financing up to 5 years, and 9.70 percent for over 5 years and up to 10 years.
Banks/DFIs will be allowed to charge 2.50 percent and 3.00 percent spread respectively for these tenors. Hence, end users'' rate for these tenors will be 12.60 percent for up to 5 years; and 12.70 percent for over 5 years and up to 10 years. Bankers said it was a condition of International Monetary Fund to phase out the subsidies on all financing schemes, and the SBP has raised rates owing to fulfil the IMF condition.