May 07, 2008	Wednesday	Jamadi-ul-Awwal 1, 1429

KARACHI, May 6: The State Bank of Pakistan said on Tuesday that the textile sector was the biggest beneficiary of the subsidised loans given under export finance scheme denying impression that the SBP was avoiding facilities to the textile sector.

The SBP and commercial banks have provided a sum of Rs273 billion under the Export Refinance Scheme (EFS) to all eligible export-oriented sectors during the first three quarters of FY08, out of which an handsome amount of Rs176 billion or 65 per cent was availed by the textile sector at 7.5 per cent – lower than ongoing 6-month Karachi Inter-Bank Offered Rate (Kibor) of around 10.32 per cent.

The SBP said the amount was equivalent to the money provided to the textile sector during the same period of FY07.

Textile sector has also availed over Rs4 billion during the same period as a long-term financing at 6 to 7 per cent, which is even below the ongoing EFS rates.

In addition to it, the SBP sanctioned an amount of Rs8 billion under its new Long Term Financing Facility (LTFF) for disbursement to the textile sector during January-June 2008. The funds so far disbursed under this scheme have been availed by the textile sector.

The SBP said that during the period from financial year 2003 to December 2007, the SBP has provided refinance amounting to Rs897.5 billion to the textile sector under EFS at the mark up rates, which were below the ongoing market rates providing sufficient savings to the sector.

Further, the textile sector has availed refinance amounting to Rs54 billion under Long Term Financing for Export Oriented Projects (LTF-EOP) scheme since its inception in May 2004 to February 15, 2008 at a fixed rate of mark up of either 6 per cent or 7 per cent for the full tenure of the loan, which can extend up to seven and a half years.

These facts are sufficient to dispel an impression that the SBP governor has refused provision of financial assistance with low mark up to the textile industry.

Pursuant to the release of the monetary policy statement for January – June 2008, the State Bank held many focused discussions with the stakeholders including the FPCCI, said the SBP.

During these meetings and discussions, the SBP explained that the monetary tightening was carried out to contain macro-economic imbalances creating inflationary pressures in the economy.

As regards provision of low mark-up financing to the textile industry, it is reiterated that the sector has always been one of the major beneficiaries of the incentives provided by the SBP under its various schemes i.e. EFS, LTF-EOP, LTFF.

The value-added sectors of the textile group have remained the major beneficiaries of the refinance granted under these schemes, said the SBP.

It is incorrect to assume that the SBP is not providing long-term financing to the value added textile sector; in fact LTTF is available to the value added sector, including fabrics, garments, made ups, towels, and art silk & synthetic textiles sub sectors of the industry, the SBP said.