ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is to approve phasing out of the SPB’s Long Term Financing Facility (LTFF) portfolio of Rs 330 billion to the EXIM Bank, sources close to Secretary Finance told Business Recorder.
The EXIM Bank was established under the Export-Import Bank of Pakistan Act, 2022. The main objective of the Bank is to facilitate expansion of exports and enhance import substitution.
Finance Ministry maintains that conventionally to expand/incentivize exports, State Bank of Pakistan, has been providing refinance facility for initiatives namely Export Finance Scheme (EFS) and Long Term Financing Facility, in both commercial and Islamic banking modes, since 2007.
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However, under the IMF Extended Fund Facility (EFF), one of the commitments pertained to phasing out of SBP’s operational involvement in the refinancing schemes and it was agreed that the said schemes are to be executed through EXIM Bank.
According to sources, in consonance with its mandate, the process for phasing out of SBP’s EFS portfolio to EXIM Bank is underway as per plan/Term Sheet, approved by the ECC/Cabinet in 2023, wherein it was further decided that phasing out of LTFF would be taken up subsequently.
Accordingly, phasing out of the LTFF to EXIM Bank, SBP’s portfolio of Rs 330 billion is to be taken over by the EXIM Bank. Alongside, fresh/additional LTFF portfolio of PKR 210 billion is also to be executed by the EXIM Bank.
The refinance schemes are launched to incentivize exports. Export Finance Scheme with aim to enhance exports of the country especially through value-added goods is available to exporters since 1973 through SBP.
To improve monetary policy transmission mechanism of SBP, Pakistan under its Standby Arrangement (SBA) has agreed with the IMF to phasing out of refinance schemes by the SBP within five years starting from current financial year up till 2028.
To meet their conditionality, a Working Group having representatives from Ministry of Finance, Ministry of Commerce, Securities & Exchange Commission of Pakistan, SBP and EXIM Bank was constituted to devise a ‘phase out’ plan. The plan developed by the Working Group was shared and subsequently agreed to by the IMF.
In this scenario, EXIM Bank, as agent of the Government, will process subsidy claims and disburse accordingly. The cost to be borne by the Government for meeting the subsidy requirements on account of both existing and fresh portfolio is estimated at Rs 91.466 billion.
After explaining the background, Finance Minister sought approval of the ECC for: (i) SBP’s LTFF portfolio of Rs 330 billion may be phased out to the EXIM Bank; and (ii) Rs 1.001 billion may be allocated to meet LTFF subsidy requirement for fresh portfolio for FY 2025 through Technical Supplementary Grant (TSG).
EXIM Bank, as disbursing agent of Ministry of Finance will process the markup subsidy claims of PFIs/PIBIs and disburse the subsidy on behalf of the GoP.
Copyright Business Recorder, 2025
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