A letter of credit (L/C) made possible by the International Finance Corporation (IFC) features in an innovative financing for a new power generation plant in Pakistan.

The L/C made available via the IFC's Global Trade Finance Programme (GTFP) is used in a structured trade finance deal that may be a blueprint for the future as Pakistan works to reduce its power shortages.

Structured deal

The innovative structured trade finance deal is being put together by the IFC, Habib Bank Limited (HBL) and Citibank.

Citibank and IFC worked together to structure the deal that makes up to EUR 73 million available for the power generator to import the goods it needs to construct and operate its facilities.

Power incentives

Pakistan's largest privately owned bank, HBL, established the original L/C, which was confirmed by Citibank under the GTFP. This is the first time such a structure has been used in Pakistan for the import of capital equipment.

Separately, the State Bank of Pakistan has said that L/Cs established since 1 January 2008 but retired or to be retired during 2009 related to certain power sector imports will be eligible for refinancing under a scheme that provides subsidised rates for the import of generators.

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