Covid-19 Measures by SBP

We are supporting growth and employment by easing the requirements on exporters and importers to gain access to cheap finance under our existing facilities.

SBP extends time for settlement of foreign currency loans

On Aug 20, 2020, SBP further facilitated the exporters and importers by allowing extension up to 180 days in settlement of their export and import loans under FE-25 Scheme. Banks can now allow extension up to 180 days to exporters in settlement of their FE-25 loans in case they are facing delay in realization of export proceeds due to COVID-19. Moreover, banks can also allow settlement of FE-25 loans to exporters through substitute contract during the extended period of 180 days where the original export contract has been cancelled due to COVID-19. Likewise, SBP has also allowed the bank to extend the maturity of FE-25 import loans by 180 days. This facilitation has been provided to exporter and importers for their foreign currency loans maturing up to September 30,2020.

SBP provides exporters an increased limit of Rs 190 billion

On Aug 19, 2020, SBP enhanced the limit of refinancing provided to the banks under Exports Finance Scheme (EFS) by Rs 100 billion. Hence, banks will now have overall limits of Rs 700 billion for the exporters for FY21. Moreover, to promote export oriented investment, Rs 90 billion have also been allocated under Long Term Financing Facility (LTFF) for the FY 21.This amount is in addition to limit of Rs 100 billion already allocated to banks/DFIs under Temporary Economic Relief Facility (TERF) - a concessionary refinance scheme for setting up of industrial units.

SBP reduces markup rate under Long Term Financing Facility (LTFF) to 5% for all sectors across the board

On Jul 08, 2020, SBP reduced its refinance rate under LTFF for non-textile sector by 1% and therefore the end user rate for all sectors across the board will be 5%. Earlier the end user markup rate under this scheme were 5% for textile sector and 6% for non-textile sectors. It is expected that the above measures will help facilitate long term investment in both domestic and export market.

SBP has a strategic objective to support exports for sustained improvement in Pakistan's balance of payments and growth. To this end SBP provides refinance to banks to provide cheap credit at interest rates that vary between 3 to 6 percent to exporters for working capital and new projects under Export Finance Schemes (EFS) and Long Term Financing Facility (LTFF) schemes. The total subsidized credit to exporters outstanding under both these schemes is currently approximately Rs. 660 billion. Due to the COVID-19 pandemic Pakistan's exporters are facing declining demand in overseas markets and problems in executing existing orders. To support exporters in these circumstances and to prevent current liquidity problems from turning into solvency problems amongst exporters, SBP has announced following several measures today.

Relaxation in matching amount

Availing cheaper credit under EFS is linked with the export performance. Currently, exporters are required to export twice the amount of borrowed funds. In case of failure in meeting the requirement penalties are imposed and the credit limit for the next year is also reduced accordingly. SBP has reduced the performance requirement from twice to one-and-a-half times that will be effective for the current year as well as for FY21.

Extension in time period to meet performance requirements

Exporters were required to show performance under the EFS schemes by end of June 2020. This period has been extended by 6 months to end December 2020. Since the additional period will also be counted towards setting new limits, this will help the exporters in availing higher limits for FY21.

Extension in time period to ship goods

Exporters availing the subsidized credit schemes are required to ship their goods within 6 months of availing credit under EFS. In case of failure, penalties are imposed. This period has been extended from six to twelve months. Therefore, exporters will not be liable to pay penalties due to breach of this condition during January to June 2020.

Relaxation in conditions for Long Term Financing Facility

Exporters who want to avail credit under Long Term Financing Facility (LTFF) are required to have exports worth 50 percent, or USD 5 million, of the total sales to become eligible. This limit has been reduced to 40 percent or USD4 million for all the borrowings under LTTF during the period January 01, 2020 to September 30, 2020. Moreover, under the requirement of annual projected exports performance for four years to avail LTFF for new or BMR projects has been extended by another one year. Now the projected exports performance will be measured in 5 years.

Realization of export proceeds

Another major relaxation has been provided to the exporters on foreign exchange side. Keeping in view the difficulties faced by the exporters, SBP has also allowed banks to enhance the time period for realization of exports proceeds from existing requirement of 180 days to 270 days on a case by case basis where the delay is related to COVID-19. This would help exporters to provide extended time to their buyers in making payment due to above pandemic. Likewise, to facilitate importers, SBP has extended the time period for import of goods into Pakistan against advance payment from existing requirement of 120 days to 210 days.

Exporters can directly dispatch the shipping documents

SBP has allowed exporters to directly dispatch the shipping documents of their exports' consignment to their foreign buyers without any limit, subject to condition that the exporter's export over-dues are less than one percent and the exporter has exports of at least USD 5 million during the previous three years. Earlier, exporters could dispatch the shipping documents directly to their foreign buyers for export consignments of up to USD 100,000/, or equivalent in other currencies. This limit was in place since 2017.

Limits on advance payments for imports increased

Moreover, SBP has enhanced the existing limit of USD 10,000/, or equivalent in other currencies, per invoice allowed to banks to make advance payment on behalf of manufacturing & industrial concerns and commercial importers for import of raw material, spare parts and machinery, to USD 25,000/.

These measures are in continuation of facilitating export-oriented industries and manufacturing concerns in the backdrop of ease of doing business and promoting exports' growth and will further contribute in improving economic outlook of the country.

It is pertinent to mention here that in January 2020, SBP had taken certain measures to facilitate export-oriented industries and manufacturing concerns. These included:

1. Extending the facility to make advance payment up to USD 10,000/, or equivalent in other currencies, per invoice, for import of raw material, spare parts and machinery to commercial importers as well in addition to manufacturing & industrial concerns, allowed earlier.
2. Allowing Authorized Dealers to effect import advance payment against irrevocable letter of credit, up to 100% of the value of letter of credit, for import of plant, machinery, spare parts and raw material etc. on behalf of manufacturing concerns for their own use only.
3. Extending the facility allowed to manufacturing & industrial concerns for import of raw materials and spare parts on open account basis to commercial importers as well.