KARACHI, Jan 29: The State Bank has advised all banks to stop giving foreign currency loans to the exporters under the ADB- sponsored Foreign Currency Export Finance (FCEF) facility after January 29, 2004.

A SBP circular (FE 01) issued on Thursday said that the lack of interest from the exporters and under utilization of the scheme by them has reduced its economic usefulness. Accordingly the government has decided to repay the Asian Development Bank loan ahead of its scheduled repayment.

The government had negotiated a loan in US dollar with the ADB to meet the financing requirements of the exporters in foreign currency for import of inputs required by the exporters for manufacturing exportable goods.

Pakistan on Thursday pre-paid $1.1 billion worth of 14 expensive ADB loans."It has, however, been observed that the scheme did not attract exporters as its utilization has remained at a very nominal level because of a number of reasons," says the circular.

"Efforts by the State Bank in enhancing the utilization of the scheme have also not been successful," it observes justifying its decision to terminate the scheme with immediate effect.

Senior bankers say the termination of the ADB-sponsored Foreign Currency Export Finance (FCEF) scheme has nothing to do with the banks' own lending in foreign currency to exporters. They say banks will continue to give foreign currency loans to their customers. They say one of the major reasons for the failure of ADB-sponsored scheme for foreign currency export financing was that it involved a lot of documentation on the part of the exporters.

"Besides, the exporters normally feel more comfortable in getting foreign currency loans offered by the banks on such pricing and conditions that suit them, said a foreign bank treasurer.