SBP expands EFS to improve exports, forex inflows

KARACHI: The State Bank of Pakistan (SBP) on Wednesday enhanced the scope of Export Finance Scheme (EFS), both conventional and Sharia based, allowing exporters to obtain financing against their export proceeds through discounting of export bills/receivables.

The move aims at facilitating exporters and encourages timely inflow of export proceeds.

“Discounting of bills/receivables is essentially a financial transaction where the exporters surrender their future export proceeds and obtain financing in PKR for the remainder of the time period of exports proceeds realisation,” SBP said.

The central bank said exporters could obtain financing from banks by discounting their export bills/receivables (both post-shipment and pre-shipment) under the scheme, at rates ranging from 2 percent to 3 percent depending upon the tenor of discounting.

“In the first three months, this facility will be available at introductory lower rates of 1 percent and 2 percent. Banks will obtain refinance equal to discounted amount for the tenor of discount at tier-based rates ranging from 1 percent to 2 percent,” it added.

The central bank sees the initiative helping exporters meet their working capital needs and also incentivising them to bring in their export proceeds in a timely manner, which would help to improve foreign exchange inflows in the interbank market.

In addition to supportive rates for working capital needs of exporters, SBP said it provided a special relaxation under the facility by increasing the export proceed realisation period up to 180 days if the exporter avails the discounting facility.

SBP informed that full export value of goods exported from Pakistan and declared to the custom authorities might be received up to one hundred and eighty days (180) days from the date of shipment, subject to the condition that export bills/ export receivables were discounted and sold in forward by the exporter to the authorised dealer (bank) before shipment or within fourteen 14 days from the date of shipment.

Meanwhile the central bank also enhanced the indicative credit limits for agriculture financing by banks to farmers to align the amount of financing with agriculture input requirements

The enhanced indicative credit limits for production and development loans of farm and non-farm sector will directly benefit agriculture borrowers, who will now be able to obtain more credit from banks and in turn enhance agriculture productivity through adequate use of inputs, it said.

This will also enable banks to align the loan amounts with the actual requirements of farmers and resultantly enhance flow of agriculture credit.

It is important to note that the indicative credit limits serve as a guideline for banks to assess the credit requirements of agriculture borrowers while sanctioning credit limits.

Banks may, however, make adjustments on the basis of prevailing market conditions, local prices of inputs, and repayment capacity of borrowers.

“The revised indicative credit limits will also facilitate provincial planning departments in estimating the total financial and credit requirements of respective provinces/regions for farm and non-farm sectors,” the SBP said.