KARACHI: The Temporary Economic Refinance Facility (TERF), which ends this month, posted growth of 12 per cent on a week-to-week basis to Rs481 billion on Feb 25 from Rs430bn on Feb 18, indicating higher activity in the economy.

TERF is a concessionary refinance facility aimed at promoting investment. The scheme was introduced to support stakeholders of the economy who were facing a terrible situation after the Covid-19 pandemic made its way to the country in March 2020. Financing under the facility is available through banks/DFIs to all sectors across the board except the power sector where the State Bank’s refinance facility for renewable energy projects already exists.

Maximum loan limit has been set as Rs5bn per project while the end user rate is 5pc per annum inclusive of 1pc refinance rate of the SBP. The loan is given for maximum 10 years and offers two-year grace period of repayment on a quarterly or half-yearly basis.

As per the scheme, all Letter of Credits (LCs) and Inland Letters of Credit (ILCs) established from the date of announcement of the scheme March 17, 2020 till March 31, 2021 are eligible for financing.

TERF has shown significant growth over the last 10 months as reflected by the increase in the requested amount from Rs36.1bn by the end of April 2020 to Rs729.6bn by Feb18, 2021. Approved financing reached Rs481bn on Feb 25, 20201. The reduction in maximum end user rate from 7pc to 5pc on July 8, 2020 resulted in bringing significant increase in number as well as amount of requests in the following months.

Bankers believe that the scheme is seeing rapid growth as it nears its end on March 31, 2021. The SBP has so far not announced an extension for the scheme despite improvement in the economic activities and growing interest of the stakeholders.

Published in Dawn, March 13th, 2021