Coronavirus: SBP lends a helping hand to exporters

KARACHI: The State Bank of Pakistan (SBP) has announced a respite package to support exporters affected by the loss of demand due to the Coronavirus outbreak.

Due to the Coronavirus outbreak, Pakistan’s exporters are facing waning demand in overseas markets and issues in executing existing orders.

To support exporters in these situations and to put off current liquidity issues from turning into solvency problems amongst exporters, State Bank of Pakistan announced a number of relief steps to shore up the exports.

In wake of the prevailing situation in the backdrop of challenges being faced by the export sector in post-Coronavirus development, SBP has given relief to consumers under Export Finance Schemes (EFS) and Long Term Financing Facility (LTFF) schemes and for the realization of export proceeds.

SBP deemed that these steps will facilitate exports and said that it stands ready to take additional steps as the circumstances related to  Coronavirus and its impact on the economy evolves.

SBP provides refinance to banks to provide cheap credit at interest rates that vary between 3 to 6 percent to exporters for working capital and new projects under EFS and LTFF schemes.

SBP has announced the following measures to facilitate the export sector. Relaxation in a matching amount: Availing cheaper credit under EFS is linked with the export performance.

 Currently, exporters are required to export twice the amount of borrowed funds. In case of failure in meeting the requirement, penalties are imposed and the credit limit for the next year is also reduced accordingly.

SBP has reduced the performance requirement from twice to one-and-a-half times that will be effective for the current year as well as for FY21.

 Extension in the time period to meet performance requirements: Exporters were required to show performance under the EFS schemes by end-June 2020. This period has been extended by 6 months to end Dec. 2020.

Since the additional period will also be counted towards setting new limits, this will help the exporters in availing higher limits for FY21.

 Extension in the time period to ship goods: Exporters availing the subsidized credit schemes are required to ship their goods within 6 months of availing credit under EFS.

In case of failure, penalties are imposed. This period has been extended from six to twelve months. Therefore, exporters will not be liable to pay penalties due to breach of this condition from January to June 2020.

 Relaxation in conditions for Long Term Financing Facility: Exporters who want to avail credit under Long Term Financing Facility (LTFF) are required to have exports worth 50 percent, or USD 5 million, of the total sales to become eligible.

This limit has been reduced to 40 percent or USD4 million for all the borrowings under LTTF during the period January 01, 2020, to September 30, 2020.

Moreover, under the requirement of annual projected export performance for four years to avail LTFF for new or BMR projects has been extended by another one year.

Now the performance of the projected export will be measured in 5 years. Other relaxations: Another major relaxation has been provided to the exporters on the foreign exchange side.

Keeping in view the difficulties faced by the exporters, SBP has also allowed banks to enhance the time period for realization of exports proceeds from the existing requirement of 180 days to 270 days on a case by case basis where the delay is related to COVID-19.