Islamabad/Karachi, March 21: The Economic Coordination Committee (ECC) of the Cabinet is set to approve the gradual phasing out of the State Bank of Pakistan’s (SBP) Long Term Financing Facility (LTFF) portfolio, valued at Rs 330 billion, to the newly established EXIM Bank, according to sources close to the Secretary of Finance.
The EXIM Bank, established under the Export-Import Bank of Pakistan Act, 2022, aims to promote exports and reduce reliance on imports.
The Finance Ministry has pointed out that, traditionally, the SBP has provided refinancing facilities to incentivize exports through initiatives like the Export Finance Scheme (EFS) and the Long Term Financing Facility (LTFF) since 2007, available in both commercial and Islamic banking modes.
However, as part of Pakistan’s commitments under the IMF’s Extended Fund Facility (EFF), the government agreed to phase out SBP’s involvement in refinancing schemes.
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The plan is for these schemes to be managed through the EXIM Bank. As part of the broader transition.
The process to shift SBP’s EFS portfolio to EXIM Bank is already underway in line with a plan approved by the ECC and Cabinet in 2023. The phase-out of the LTFF will follow.
EXIM Bank Supports Export Finance Facility
Under the plan, the EXIM Bank will take over the SBP’s Rs 330 billion LTFF portfolio. Additionally, the EXIM Bank will manage a new LTFF portfolio worth PKR 210 billion.
These refinancing schemes are designed to stimulate exports, with the EFS, which has been in operation since 1973, specifically targeting value-added goods exports.
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In line with the Standby Arrangement (SBA) with the IMF, Pakistan has committed to phasing out SBP’s refinancing schemes within five years, from the current fiscal year until 2028.
To ensure compliance with this condition, a Working Group comprising representatives from the Ministry of Finance, Ministry of Commerce, Securities & Exchange Commission of Pakistan (SECP), SBP, and EXIM Bank was formed.
The group developed a phase-out plan that was shared with and approved by the IMF.
As part of the transition, EXIM Bank will act as the government’s agent in processing subsidy claims and disbursing the funds accordingly.
EXIM Bank As Govt Agent
The cost of meeting the subsidy requirements for both the existing and fresh LTFF portfolios is estimated to be Rs 91.466 billion.
In light of this, the Finance Minister has requested ECC approval for two key actions: (i) the transfer of SBP’s LTFF portfolio of Rs 330 billion to EXIM Bank, and (ii) the allocation of Rs 1.001 billion to cover the LTFF subsidy requirement for the new portfolio for FY 2025 through a Technical Supplementary Grant (TSG).
EXIM Bank, acting as the disbursing agent for the Ministry of Finance, will process the subsidy claims and disburse the subsidy on behalf of the Government of Pakistan.
