17 April 2004	Saturday	26 Safar 1425

KARACHI, April 16: The State Bank has decided to link the rate of markups on the much-awaited long-term export financing scheme to average yields on treasury bills and Pakistan Investment Bonds.

It may allow the banks to price two-year and three-year export loans at a rate equivalent to the average of weighted average yields of the last two auctions of one-year T-bills or three-year PIBs.

The central bank also proposes that banks may price five- year to seven-and-a-half-year loans at a rate equivalent to the average of weighted average yields of five-year PIBs in the last two auctions. The SBP shall determine these rates on annual basis on 1st of March every year.

The rates of finance/refinance on the outstanding amount once locked into shall remain fixed for the entire period of financing provided the borrowers continue to make payments on due dates.

The borrower shall not be required to make payment on account of markup at a frequency of less than a quarter. Banks/DFIs shall be allowed a maximum spread of 3pc annum where refinance under the scheme is obtained from the SBP.

This proposed markup rates structure forms part of the draft scheme for provision of long-term financing for the export- oriented projects or LTF-EOP for short. The central bank has put the details of the scheme on its website and sought feedbacks upto April 22.

The scheme has been designed to help eligible exporters import plant and machinery not manufactured locally. Under the scheme the banks offering finance for the import of plants and machinery would lend money to eligible exporters in local currency. The SBP may provide them the required foreign exchange for this purpose.

Central bankers say after seeking feedbacks from stake holders the SBP would finalize the scheme and make it functional before the announcement of the budget for the next fiscal year starting in July.

WHO WOULD BENEFIT: The banks/DFIs offering finances under this scheme shall give preference to SMEs. Accordingly banks and DFIs shall utilize at least 50 per cent of the amount of the limit sanctioned by the SBP for financing the borrowers in SME sector.

The long-term financing facility for export-oriented projects shall not be admissible in case of plant and plants and machinery /equipment and accessories already imported.

Similarly commercial importers and trading houses shall not be entitled to avail of this facility. More importantly the facility shall also not be admissible for establishment or BMR of new projects in spinning and weaving sectors in textiles.