Used machinery import refinance: SBP may extend deadline under LTFF

The State Bank of Pakistan (SBP) is likely to extend the deadline for import refinance of second-hand machinery under the Long-Term Financing Facility (LTFF) scheme, official sources told Business Recorder.
This indication came from the SBP in reply to a letter written by Dr Mirza Ikhtiar Baig, Federal Advisor on Textile regarding extension in LLTF for second-hand machinery.
"We have received various representations from the textile associations, requesting for continuation of SBP LTFF for second-hand machinery. The scheme expired on December 31, 2009," sources quoted Baig as saying in his letter to the SBP.
According to sources, the Advisor also spoke to SBP Governor Salim Reza and LTFF Director and informed them that after withdrawal of customs duty on value-added textile machinery, textile industry intends to import textile machinery under this scheme.
Sources said that the Ministry of Textile Industry has directed the textile sector to furnish information of export-oriented projects, planning to import second-hand machinery.
However, SBP is of the view that the request of the stakeholders for extension in the deadline to refinance second-hand machinery under LTFF scheme would be examined in the light of estimated financial impact of such imported machinery items.
"Textile Ministry should request the concerned associations to submit the names of those export-oriented projects to the SBP interested to open LCs for import of second-hand machinery to enable the Bank to proceed on this issue," said Muhammad Ishfaq, SBP Senior Joint Director. The SBP has also asked the Textile Ministry to obtain the estimated cost of second-hand machinery to be imported.
The SBP recently announced raise in the rates of refinance under the Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) by 0.50 percent and 1.10 percent, respectively, following IMF condition to eliminate subsidies on loans. The new revised financing rates, under EFS and LTFF, would be charged from April 1, 2010.
According to Business Recorder report, under the Stand-by Arrangement, the government has committed to the International Monetary Fund (IMF) to phase out subsidies on mark-up for export-oriented units and, as per agreement with the Fund, interest mark-up rates for EFS and LTFF will be increased in line with the level of the weighted average yield on six-month T-bills and yields of the same tenor for Pakistan Investment Bonds by end of September 2011.
At present, the central bank is operating special schemes comprising EFS and LTFF for the export-oriented units with the aim of boosting the country's depleting exports and generate foreign exchange for external payment, sources said,; and added that since September 2009 the SBP has been increasing interest rates of these schemes as part of IMF conditions.