January 31, 2020 (MLN): In continuation of Government’s endless efforts to facilitate export-oriented industries in the backdrop of ease of doing business and promoting exports’ growth, the State Bank of Pakistan (SBP) Governor Dr, Reza Baqir, on the sideline of monetary policy announcement has also announced fresh measures to the export sector.
These measures include increasing concessional financing for the exporters both for working capital and long-term financing need up to Rs200 billion, including Rs100 bln each for Long-term Financing Facility (LTFF) and Export Refinancing Scheme (EFS). The scope of LTFF and EFS has been extended to all sectors.
In addition to this, SBP enhanced the maximum limit from Rs 2.5 billion to Rs 5 billion per project under LTFF to all exporters and allowed commercial banks to make USD 10,000 advance payments on behalf of commercial importers for importing raw material, spare parts and machinery.
Furthermore, for manufacturing concerns, SBP has allowed making 100% payment in advance for import of plant, machinery, spare parts and raw materials etc against the letter of credit (LC). Earlier, it had allowed advance payment of up to 50% in December 2019.
The SBP has also allowed banks to make an advance payment up to $10,000, or an equivalent thereof, per invoice on behalf of commercial importers for import of raw material, spare parts and machinery. The same limits for such imports are also available to commercial importers on open account.
Besides, the SBP would also announce separate financing limits for SME exporters under the LTFF and the EFS in March 2020
Beyond any doubt, these steps are considered to be the keystone for long-term macroeconomic stability as the private sector is facing a high cost of doing business due to policy obstructions. Continued monetary tightening has hampered private sector cash flows.
Senior economist Khurram Shehzad while giving his views on the said development has said that it is a good measure taken by SBP as the exporters are facing a liquidity problem. This step would provide breathing space to exports of Pakistan and subsequently increased investment and foreign inflows.
In the backdrop of the said measures, the intention of the government to earn from exports is clearly visible. Since the government is striving hard to increase exports by shifting its focus from consumption fueled growth to export-led growth as consumption-oriented growth is not workable in the current scenario. Previously, Pakistan heavily relied on imports which increased Country’s trade deficit and debts, although most of the imports were capital goods and petroleum products which are used to run the production processes in the economy.
Another Senior Economist Muzammil Aslam, while taking to Mettis Global News stated that Government is trying to change the composition of growth from imports oriented to exports based. To encourage export-led growth, the government provided tax advantages to exporters to improve ease of doing business.
He further apprised that, all institutions are making an integrated effort to support the government’s measures which never seen before. In the past, policies were not cohesive, counteractive measures taken by the government were affected by the disparities between the institutions’ policies.
To sum up, since every measure takes time for reflection, similarly, exports incentives provided by the government will take time to materialize. Thus, every expenditure on the export-oriented sector would bring more optimism in the economy.
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