Islamabad: Taking around RS92 billion responsibility in the public bag, Pakistan approved on Friday eliminating on Friday the subsidized export financing scheme of RS330BN of the State Bank of Pakistan (SBP) to comply with another condition of the International Monetary Fund (IMF) that currently contains the personnel level agreement for disbursements of disbursements of disbursements of $ 1.1bn disbursements.
The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, chaired by the Minister of Finance, Muhammad Aurengzeb, and assisted three other members of the ECC: Ministers for oil, power and investment.
At the request of the Ministry of Finance, the “ECC decided that the State Bank of Pakistan in the long -term Pakistan (LTFF) of the RS330 billion portfolio would be gradually eliminated to the Exim bank, with an assignment of RS1.001BN through a technical subsidy to meet the LTFF subsidies requirement for the new goal for FY25”, it is said.
With the consent of the IMF and under the gradual elimination plan of the LTFF to the Exim bank, “Exim Bank must assume the SBP portfolio of RS330 billion. Together with the fresh/additional LTFF portfolio of RS210BN, it will also be executed by the Exim bank,” according to the summary of the Ministry of Finance.
Exim Bank to take care of the RS330B Ltff portfolio of State Bank
The Exim Bank will process subsidy claims and disburse accordingly as a government agent. “The cost in charge of the government to meet the subsidy requirements due to the existing and new portfolio is estimated at RS91,466 billion,” the ECC said.
The Exim Bank was established by virtue of the Pakistan 2022 imports to facilitate exports expansion and improve import substitution. Conventionally, to expand and encourage exports, the SBP has been giving refinancing facilities under the export finance scheme (EFS) and LTFF in commercial and Islamic banking modes since 2007.
However, under the extended background (EFF) of the IMF, one of the commitments belonging to the elimination of the SBP operational elimination in the refinancing schemes and it was agreed that these schemes will be executed through Exim Bank.
In the consonance with his mandate, the process to eliminate the elimination of the SBP EFS portfolio to Exim Bank is underway according to the term sheet approved by the ECC and the Cabinet in 2023 that required a posterior phase of LTFF.
Refinancing schemes have been available for exporters since 1973 through SBP.
“To improve the mechanism of monetary policies of SBP, Pakistan under its waiting agreement (SBA) has agreed with the IMF to eliminate refinancing schemes within five years from the current financial year until 2028,” the ECC said.
A working group with representatives of the Ministry of Finance, the Ministry of Commerce, the Bolsa and Securities Commission of Pakistan, SBP and Exim Bank has devised a ‘gradual elimination’ plan.
“The plan was shared and subsequently agreed by the IMF,” the ECC was told. Exim Bank, as a disbursing agent of the Ministry of Finance, will process the claims of marking subsidy of financial institutions and investment bond investors and disburs the subsidy on behalf of the federal government.
Complementary subsidies
The ECC also approved four supplementary grants from RS3.4bn. These included RS2bn to the Ministry of Information for the payment of advertising fees pending to the media houses, RS430m for parliamentary schemes in Punjab and RS250m for operations of the Jinnah Medical Complex & Research Center (JMC and RC) company in Islamabad.
This assignment of JMC and RC will support the establishment of an academic medical center of 1,000 last generation beds in Islamabad. However, the ECC ordered the company JMC & RC to provide a detailed breakdown of the expenses and activities that will be covered with RS250m approved before looking for more assignments.
The ECC also approved a supplementary subsidy of RS24.556m (equivalent to $ 87,671.21 to a exchange rate of RS280.1) to Mrs. Lia Lia Pump of Jaed Textile PVT LTD, Sydney, Australia, in accordance with the specific instructions of the Pakistan Supreme Court on March 19, 19.
Mrs. Bomba had ordered some textile imports from Pakistan, which the local supplier did not comply. Litigation began, with the maximum responsibility falling on the government due to the period due to insecure systems. The Pakistan Supreme Court ordered immediate payments to satisfy an international client.
Posted in Dawn, on March 22, 2025
