KARACHI, June 21: The State Bank of Pakistan has waived requirement of 35 per cent cash margin on a number of essential import items with immediate effect.

SBP Governor Dr Shamshad Akhtar made the announcement at the third meeting of the Private Sector Credit Advisory Council at the central bank here on Saturday.

“With the issuance of this additional list, most of industrial raw materials and inputs have now been exempted from cash margin requirement,” she said, adding instructions have been issued to all banks in this regard.

The decision was taken in order to enable members of Federation of Pakistan Chambers of Commerce and Industry, All Pakistan Textile Mills Association and other trade bodies to meet their input manufacturing requirements and timely delivery of export orders.

Dr Akhtar stressed the need for cooperation from the industry and urged them not to go for excessive forward import bookings.

She asked exporters to bring back their export proceeds well before scheduled time. She assured representatives of industry that the SBP would not discontinue export refinance scheme, and that the concessional loan facility for export-oriented industries would continue.

She said private sector credit disbursement in the current fiscal year (up to May 31) remained strong despite a challenging economic year because of several internal and external shocks that economy had faced.

The SBP governor said overall private sector credit recorded higher growth of around 16 per cent in FY08 with Rs384 billion compared with Rs287 billion in FY07. On annualised basis, growth in private sector credit is 19 per cent in FY08, which is higher than 17 per cent last year.

The distribution of credit was broad-based as almost all sectors of economy availed credit with major chunk i.e. 59 per cent availed by manufacturing sector, including textile sector.

According to Dr Akhtar, there has been a massive increase in working capital loans that have risen to Rs311 billion from July 2007 to April 2008 in FY08 compared with Rs152 billion in same period of FY07.

Inflationary pressure and higher cost of inputs are main reasons for higher credit flow for working capital needs in current fiscal year.

She said private domestic banks are playing key role in meeting private sector credit demand as they have improved their share in overall credit disbursement to 84 per cent from 72 per cent.

Public sector and foreign banks lost their shares, coming down to 14 per cent and one per cent, respectively, from 22 per cent and five per cent last year.

Credit disbursement to agriculture sector in first 11 months of current fiscal year showed 30 per cent growth year-on-year. Banks disbursed combined total of Rs185 billion to agriculture sector as compared to Rs142 billion in the same period last year, showing an absolute increase of Rs43 billion, she stated.