April 2, 2002	Tuesday	Muharram 18,1423

KARACHI, April 1: Exporters will get export finance from banks at 8 per cent during this month instead of 7.5 per cent.

The export finance rate has moved up to 8 per cent as the State Bank has told banks that it would provide them export refinance at 6.5 per cent in April 2002 up from 6 per cent in March. As usual banks are free to charge 1.5 margin while offering export finance to the exporters. In March the export refinance rate was fixed at 6 per cent and banks were allowed to add another 1.5 per cent to it while providing export finance to eligible exporters.

A SBP circular issued to all banks said that SBP would provide export refinance also at 6.5 per cent for financing under part B of export finance scheme and for locally manufactured machinery. Banks will be free to charge a maximum margin of 1.5 per cent on these modes of financing. This means that banks will offer export financing for these purposes also at 8 per cent in April.

The State Bank fixes monthly export refinance rate at a level equal to the weighted average yield of six-month treasury bills in the preceding month.

Since the weighted average yield on six-month T-bills comes to 6.5 per cent in March the export refinance rate has been fixed at the same level for April. Now as the banks are allowed to charge a spread of 1.5 per cent on this rate the export finance rate applicable on permissible export financing would be 8 per cent in April.

This is for the first time during the current fiscal year that the export finance rate has moved up. At the start of the fiscal year in July last the markup on export financing was 13 per cent. During the first nine months of the fiscal year it came down to 7.5 per cent as the State Bank followed an expansionary monetary policy.

As the central bank has recently stopped further easing of the policy and allowed a marginal increase in treasury bills rate the export financing has become a bit dearer. But how long the SBP will keep the monetary policy stable — or whether it will tighten the policy depends much on the nature of the revised monetary targets set by the IMF.

Pakistan is supposed to meet these and several other targets set for end-June 2002 to qualify for the third tranche of a $1.3 billion poverty reduction and growth facility. The IMF board has already cleared way for the release of the $107 million second tranche.