KARACHI, Nov 5: State Bank of Pakistan Governor Dr Shamshad Akhtar on Wednesday announced that the central bank would provide 100 per cent refinancing to banks against export finance provided by them to exporters under Part-I of the Export Finance Scheme (EFS).

Earlier, the State Bank was providing export finance to the banks up to 70 per cent. The export finance already provided by banks and outstanding as on October 31, 2008 will also be refinanced by the SBP for the remaining period of individual loans, an SBP press release said.

The SBP governor pointed out that in order to ensure adequate flow of credit to exporters, the SBP had taken various initiatives in the recent past.

She said that the banks’ limits under EFS had already been increased by 25 per cent to fulfil the credit need of exporters. However, she added that it was observed that various banks were feeling difficulty in providing export financing due to exhaustion of limits under the EFS and increasing requirement of credit due to exchange rate depreciation.

Financing under the EFS is a subsidised source of finance from the SBP involving a subsidy of about 8 per cent for exporters to enable them to compete in the international markets to boost exports.

As the funds provided under the EFS involve huge subsidy from SBP, exporters associations had been advised to ensure rightful use of funds by their members through self-regulating mechanism, in addition to the regulatory mechanism put in place by SBP to prevent misuse of financing.

The State Bank monitors the flow of credit to all sectors and takes required measures to meet adequate credit requirements of any sector, in particular, the credit requirements of exporters.

The central bank has also recently taken various measures including the reduction in CRR/ SLR requirements to enhance the liquidity of the banking system. —APP