FinanceNews

SBP slashes export finance rate by 1 percent

KARACHI (November 30 2002) : The State Bank of Pakistan on Friday announced cut in the rate of export refinancing by one percent to bring it to 7 percent.

The exporters had been expecting a cut of 1.5 to 2 percent after the slashing of discount rate and 6-month Treasury Bills rate by 1.5 percent and 1.35 percent respectively.

The gap between the 6-month T-bills rate and the rate of export financing has also increased to 2.16 percent from earlier 1.63 percent.

In the last 18 months, the refinance rate has dropped from 13 percent to 7 percent. This is a huge cut which extensively supported the exporters to remain competitive in the world market and improve their margin of profit which was declining because of a number factors including the appreciation of rupee against the US dollar.

“The State Bank has announced the reduction in the rates of export refinance under the Export Finance Scheme by one percent, from 8 percent to 7 percent with effect from December 1, 2002,” said the release issued by the SBP.

It has been decided that the rate of refinance under the Export Finance Scheme applicable for the month of December 2002, will be 5.5 percent p.a. The commercial banks will, however, ensure that where financing facilities are extended by them to the exporters for availing refinance facilities under the EFS, their maximum margin or spread does not exceed 1.5 percent, said the SBP.

The financing facilities under Part-B (export sales) of the Scheme for financing Locally Manufactured Machinery will also attract similar mark-up rate structure.

Some exporters said that the cut in export financing should be 2 percent instead of one percent. However, bankers found it a correct decision, especially in the wake of slashing of discount and T-bills rates.

The exporters said that the fast appreciation of Pak rupee against the greenback in one year has put them in tough conditions in the international market making their margin of profit thinner.

The exporters said that 9 percent decline in US dollar against the Pak rupee in 14 months has put enough pressure on them to minimise their margin of profits.

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