Pakistan's MCB Bank has joined with Citibank and two international development banks (IDBs) to support an important letter of credit (L/C) deal for Pakistan's textile industry.

The Asian Development Bank (ADB), the International Finance Corporation (IFC) and Citibank have jointly guaranteed the L/C issued by MCB Bank.

German machinery

The EUR 110 million L/C will finance Ibrahim Fibres Limited's purchase of German machinery to produce polyester staple fibre and polyester chips.

The new machinery should nearly double the textile producer's polyester production capacity from 650 tons to 1,250 tons per day.

International guarantees

In this financing, Citibank has guaranteed 51 per cent of MCB Bank's risk while the IFC and the ADB have assumed 30 per cent and 19 per cent respectively of the local bank's risk.

The IDB guarantees are provided through ADB's Trade Finance Programme (TFP) and IFC's Global Trade Finance Programme, both of which support L/C transactions through guarantees.

IDA support

Last year, the TFP supported over US$600 million worth of cross-border trade in Pakistan according to the ADB.

The IFC says it has provided Pakistan's banks with US$328 million in trade finance guarantees over the last six months, an increase of US$125 over the same period a year ago.

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