The State Bank of Pakistan (SBP - central bank) has cut the mark-up rate on financings arranged through the dollar-based foreign currency export finance (FCEF) scheme.

The move aims to encourage more exporters to use the Asian Development Bank (ADB) backed facility that gives manufacturers of exportable goods better access to export financing and funding to buy imported materials on letter of credit (L/C) terms.

Competitive rates

The SBP in mid-September announced a 1.81 per cent cut on FCEF financing rates, reducing the mark-up from 7.65 to 5.84 percent on pre-shipment and post-shipment financing and from 7.15 to 5.34 per cent on post-shipment financings where exporters have obtained post shipment cover. The SBP has also cut from 5.65 to 3.84 per cent the mark-up it charges the banks on refinancing of FCEF.

The facility was introduced in March 2001 but fewer than expected exporters have used the scheme. One reason for this may be that rupee-based export financings have been priced more competitively than dollar-based FCEF financings. The new rates aim to make the cost of financings under the FCEF more competitive.

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