Exporters demand cut in refinancing rate

KARACHI: Exporters on Wednesday urged the central bank to cut refinancing rate under export finance scheme (EFS) by 200 basis points to 5.5 percent to provide them relief following a cut in key discount rate.
Currently, exporters are getting refinance at a rate of 7.5 percent, which is highest in the region. Countries, including Vietnam, Bangladesh, India and China, have far less refinance rates.
“Following a one percent cut in the discount rate, the central bank should pass on the benefit,” said an exporter.
“Exports are already affected by adverse impacts of the energy crisis and fall in the value of dollars during July to November 2014.”
The central bank has linked EFS rates with weighted average yields of last-three auctions of six months treasury bills.
“There are two financing instruments EFS and long-term financing facility (LTFF) and it is a high time for the central bank to lower LTFF rates for the up-gradation of technology for three years by 250 points than the discount rate of 8.5 percent,” said an official at All Pakistan Textile Mills Association.
LTFF rate for a period of three to 10 years are linked with 3-, 5- and 10-year Pakistan Investment Bonds’ weighted yield of last two auctions.
Banks and participatory financial instruments are allowed to charge a maximum spread of 1.5 percent, 2.5 percent and 3.0 percent for financing up to 3, 5 and up to 10 years, respectively.
“Lowering of the refinancing rate is the most effective way to facilitate exporters and to encourage banks to include export finance under priority sector lending category,” said Rashid Siddiqui, President Korangi Association of Trade and Industry.