Some measures to take to boost trade and ease of doing business: SBP governor

November 12, 2019 (MLN): The Governor State Bank of Pakistan, Dr Reza Baqir briefed on the economy today which covered a range of issues in a recent press conference, held in State Bank’s head office.

He discussed some important economic development which happened last week especially improvement in stock and exchange market and a successful IMF review.

He further said that he will announce some measures to boost trade and ease of doing business. Two decisions have been taken to smooth the business activity- advance payment eased, and other contract services from abroad problems to be eased.

In July-18, advance payment against imports was restricted because at that time, the external position was weakening and the exchange rate was overvalued. The purpose was to lower imports to control the foreign currency outflow. It was relaxed a bit in Aug-18 and then in Jan-19, but major payments were restricted. Today, now all imports up to $10K for manufacturing are allowed for each invoice.

The second element was services – allowed if the contract is registered with SBP, but for consultancy services, SBP approval was needed. These restrictions are removed up to $10k.          

The governor apprised that we are moving in phase manner – better our experience in future – we will take more steps. These are small steps because we want to support SMEs and later we extend this to big manufacturers.

He explained that in early days there were uncertainties. Restrictions were there because the exchange rate regime was not sustainable. In May-19, we altered the regime and now clarity is coming.  Over time, the exchange rate has been stabilized. Decisions helped to improve external factors and situation.

With regards to Exporters facilitation, he said that exporters have an important role in the economy – in the next phase we need to focus more on exports. For sustainable development, the country relies on exports. For that short term and long term, measures are needed for earning foreign exchange which will increase our reserves. The core part of the strategy is to promote exports – change orientation from inward to outward

i.              STFS- Short Term Finance Scheme – working capital – the exporter interest rate is only 3 per cent.

ii.             LTFS – Long Term Finance Scheme – for plant and machinery financing – interest rates is 5% for textile and 6% for other sectors.

SBP provides interest rate differential to banks – 25 per cent of private credit expansion since Jun-19 is due to exporters. In FY19 half fixed investment is due to LTFS.

Today we are announcing to enhance the limit in these schemes – substantially, and in LTFS we look at expanding sectors i.e. to explore new sectors. We will communicate new enhanced limits to banks. This will increase the ability to enhance the capacity of exporters. We have to change orientation from inward to outward for growth.

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