UK concerned over ‘largely unused’ export credit facility

ISLAMABAD: British government on Thursday asked Pakistan to expedite utilisation of 1.5 billion pounds of annual credit line by facilitating UK businesses investing in and exporting to the South Asian economy.

British High Commissioner to Pakistan Christian Turner said £1.5 billion of credit line for export credit facility remains largely unused.

“British companies are keen to invest in the energy sector of Pakistan especially in off-grid solutions and distribution, generation system,” Turner said during a meeting with Special Assistant to the Prime Minister on Petroleum Nadeem Babar.

The UK credit financing for Pakistan has tripled in the last two years. In September, UK Export Finance, a state-owned credit financing agency, increased its annual funding limit to £1.5 billion from £1 billion earlier for British businesses to promote trade with and investment in Pakistan.

The agency covers the full repayment of a loan plus interest to foreign banks that issue loans in local currencies to a buyer of British capital goods and/or services. The guarantee reduces foreign currency risks for overseas borrowers and buyers of British products/services and avoids fluctuating debt services costs.

The objective is to facilitate overseas business opportunities for British exporters, in particular for projects that usually generate revenues in local currencies, such as utilities, local transport, and projects in local municipalities.

Babar said the government carried out structural reforms in the energy sector in view of the newly renewable energy policy.

The government has set a target to introduce 20 percent renewable energy by 2025, and 30 percent by end of 2030. With an additional share of 30-40 percent hydropower generation, the country will have the cleanest generation mix, he said.

The PM aide said the government is focusing on assembly and manufacturing of wind turbines and solar panels for renewable energy projects with the collaboration of foreign companies. He invited British companies to participate in the projects.

The UK is Pakistan’s third largest export partner. Between July 2019 and March 2020, Pakistan exported 7 percent of its total exports to the UK, and the increase in the credit financing limit is expected to help turbo-charge trade relations between the two countries.

Last year, the bilateral trade amounted to £2 billion, up 6 percent year-over-year. Pakistan’s exports increased 3.2 percent, while imports from the UK decreased 1.9 percent.

UK Export Finance ensures that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer. The agency provided £14 billion of support for exports and international trade in the last five years. In 2019/20, it lent £4.4 billion of support for UK exports globally. The agency recently completed a comprehensive review of its country limits, resulting in increases in over 100 markets including Pakistan.