December 31, 2002	Tuesday	Shawwal 26, 1423

KARACHI, Dec 30: The State Bank on Monday said it has reduced the export refinance rate by one percentage point to 4.5 per cent for January 2003.

A SBP circular issued to all banks said that the banks would charge a maximum spread of 1.5 per cent over this rate.

This means that the exporters will get export loans from the banks at 6 per cent from January 1. In December banks were offering export loans at 7 per cent as export refinance rate was at 5.5 per cent.

Exactly a month ago the SBP had lowered the export refinance rate from 6.5 per cent to 5.5 per cent making it possible for the banks to offer export loans at 7 per cent instead of 8 per cent.

This had become possible after a 1.5 percentage points cut in the SBP discount rate announced in mid-November followed by a matching cut in the maximum yield on six-month T-bills later that month.

Since the T-bills yield has fallen further this month it has enabled the SBP to lower the export refinance rate which linked with the cut-off of the bills.

After following a stable monetary policy for nine long months the SBP eased it on November 16 by lowering its discount rate from 9 per cent to 7.5 per cent.

Then on November 27 it cut the yield on six-month T-bills by 1.5 percentage points to 4.8 per cent to reinforce the signal that it wants banks to make cheaper credit available to the private sector.

The November 27 lowering of the T-bills rate brought down the weighted average yield of the six-month bills to 5.5 per cent and this automatically became the export refinance rate for December.

Then it made further cut in the T-bills cut-off rate brining down its weighted average rate from 4.76 on November 27 to 4.32 per cent on December 11. The new export refinance rate is almost equal to this weighted average.