ISLAMABAD, Sept 20: The Asian Development Bank (ADB) on Friday reduced Pakistan’s country risk premiums for its Political Risk Guarantee (PRG) facility due to improved foreign exchange reserves and positive steps taken by the government to improve the economy.

The ADB provided a US$150 million PRG facility to Pakistan last September to help exporters lower costs of imported raw materials, spare parts and production equipment. The PRG facility enables international banks confirming eligible letters of credit issued by Pakistan banks to receive an ADB guarantee covering Pakistan’s country risk (including currency convertibility and transfer).

The facility enables Pakistan to become more export competitive by helping small- and medium-sized exporters.

The ADB has lowered country risk premiums as follows: for letters of credit less than the 90 days, the premium has been reduced to 1.2 per cent per annum from 1.5 per cent per annum; for 90 days to 180 days, to 1.15pc from 1.45pc; for 181 to 360 days, to 1.1pc from 1.4pc; and for over 360 days, to 1.1pc from 1.35pc.

“This reduction in premiums reduces costs for exporters, making them more competitive internationally. We are supporting private sector transections which have significant development impact,” notes Werner Liepach, ADB’s Principal Financial Markets Specialist in charge of the facility