KARACHI, March 31: Eligible exporters will continue to get export financing from banks at a maximum rate of three per cent in April this year as the State Bank has left unchanged its export refinance rate at 1.5 per cent.
What has made it possible for the central bank to keep unchanged its export refinance rate for the ninth month is the stability in treasury bills rate. The SBP had first reduced the export refinance rate in August 2003 from 2.0 per cent to 1.5 per cent in response to falling yield on benchmark six-month T-bills.
The export refinance rate is the rate at which the banks that offer export financing to exporters, claim refunds from the State Bank. On the insistence of the IMF, the central bank has linked export refinance rate to the weighted average yield of six-month TBs to make the interest rate for exporters more market-driven. Six-month TBs rate is a natural benchmark for export refinance rate because the central bank also offers export refinance for up to six months.
Banks are allowed to charge 1.5 per cent spread over the SBP export refinance rate while pricing export loans under the SBP export refinance scheme. Thus, when the export refinance rate is at 1.5 per cent, banks normally charge three per cent on export loans.
At times they reduce their spread and charge slightly lower rates, but they do this favour to only big exporters having a sound track record of dealings with their bank.
Senior bankers say since the six-month TBs yield have slightly gone up during this month and are likely to inch up further, the SBP may allow a nominal increase in its export refinance rate from May or June 2004.
