December 19, 2003	Friday	Shawwal 24, 1424

KARACHI, Dec 18: Banks made Rs16.5 billion export loans in the first five months of the current fiscal year on higher demand from eligible borrowers.

Bankers say the amount of export loans disbursed in July- November 2003 forms part of Rs124 billion bank credit offered to the private sector during this period.

They say bulk of the export loans were given to the textile sector that claims two third share in Pakistan’s total exports, but they cannot quantify that.

Pakistan’s exports during July-November 2003 rose by 11.5 per cent to $4.834 billion from $4.334 billion in a year-ago period. Of this, textile manufactures exports accounted for $3.17 billion, up 13.5 per cent from $2.79 billion. Eligible exporters get export loans from banks at floating rate.

This rate is fixed every month and is linked to the weighted average yield on six-month treasury bills. Since August this year, exporters are getting export loans at a maximum three per cent mark-up and the banks offering these loans get reimbursement from the central bank at 1.5 per cent.

Bankers say before September banks would not care about taking timely reimbursement of export loans. The reason was that they can borrow from the inter-bank market’s short-term funds through T-bills at a rate lower than the rate at which reimbursement were made. But as the secondary market rates have taken a spike in anticipation of tightening of monetary policy banks have shunned this practice.

“We are now seeking faster reimbursement of export loans from the State Bank,” said senior executive of a local bank. “The SBP gives reimbursement at 1.5 per cent, whereas the secondary market rate for six-month repo is two per cent.”

The procedure of getting reimbursement against export loans is such that banks can delay this for up to six months. In fact they do this when the situation so demands.

T-BILLS RATE: Sources close to the SBP say the spike lately seen in the inter-bank lending rates shows that T-bills rates have bottomed out — and that an increase in the same is inevitable.

Bankers say Rs11 billion flew out of the banking system on Thursday through maturity of previously sold treasury bills by the SBP at an open market operation. But the central did not make a matching injection. “That again is a sign for the things to come,” said a foreign banker, implying that the market can read it as a signal that the SBP may now allow the T-bills rate to inch up.

Senior bankers say the central bank may do this if it decides to revise its loose monetary policy stance kept unchanged since November 2002.

Theoretically the SBP should increase its discount rate to signal a tightening of the monetary policy stance, but the bankers say the discount rate has long lost its efficacy as the monetary policy anchor. The central bank had last lowered its discount rate by one-and-a-half percentage point to 7.5 per cent in the middle of November 2002.

Bankers say if the State Bank now increases its discount rate to signal any tightening of monetary policy that would make very little sense because the rate is already very high. They say the SBP will rather allow T-bills rates to inch up to give this signal — or it can do this even without pronouncing any change in its policy.