The central bank has finally shifted its focus from the goods trade to that of the services that inflicted on the dollar-hungry country a whooping deficit of up to $ 3 billion during the last couple of years.
Official data reveals that Pakistan has a negative trade with the world in services as last fiscal year, 2012-13, saw the country’s balance of trade in services registering a gap of $ 1.223 billion. This was compared to $ 3.305 billion deficit of the preceding year, FY12.
The first month of the current fiscal year, 2013-14, witnessed the country’s deficit in services trade to ease down to $ 163 million as against $ 292 million Pakistan braved in the same month last year. During the month under review the country services exports stood at $ 384 million compared to $ 547 million imports.
These negative official figures depict the country’s balance of trade in goods and services to a huge $ 16.207 billion during FY13. The FY12 was worse by seeing this gap widening to $ 18.957 billion. The State Bank of Pakistan, under the newly-elected political government, seems to have realised potential of the trade in services as Pakistan has a great manpower as is reflective of the ever-burgeoning remittances the Pakistanis working abroad are sending back home to their families. According to the State Bank, the first month of FY14 saw a record-breaking $ 1.404 billion inflow of remittances to the country. Last year in July, the country had received $ 1.205 billion, the bank said.
With a view to promote the services exports, the central bank last Tuesday decided to introduce a new Long Term Financing Facility (LTFF).
The new facility would provide necessary finance, for a period ranging from three to 10 years, to the exporters of services sector for adoption of new technologies and enhance their capacities to perform better services in line with the international competitive environment, said SBP’s IH&SMEFD Circular No. 09. Under this facility, the banks and DFIs would be able to provide long-term local currency finance for the new imports and locally-manufactured capital goods, excluding land and building, to be used in export oriented services sectors like transportation, computer and information technology.
For the purpose of availing financing under this facility, capital goods would be only those goods which would be used to produce goods and services and which have economic life for more than one year.
“Land and building would not be eligible for availing financing under this facility,” the SBP circular warned.
The LTFF would be available to the export-oriented units and/or enterprises with at least 50 percent of their sales constituting exports or if their annual exports are equivalent to $ 5 million, whichever is lower. Only those export-oriented units or enterprises would be eligible for financing under the facility which have satisfactory credit track record. “No separate limits shall be sanctioned under the facility and refinance would be provided against the overall limits sanctioned to banks/DFIs under LTFF for plant and machinery,” the SBP said.
The maximum financing limit to a single unit/enterprise would be Rs 5 billion subject to compliance with per party limits prescribed in respective prudential regulations and availability of credit limit from Ministry of Finance in case of Public Sector Enterprises.
The financing would be available at the rates applicable under SBP’s LTFF for plant and machinery.
The principal amount of loans shall be repayable in equal quarterly/half yearly installments after prescribed grace period, if any. “The mark-up shall be paid on quarterly basis,” the circular said. In case of violation of the terms and conditions of the facility, the SBP shall reserve the right to recover the entire amount of refinance granted to the bank/DFI along-with fine at the rate of Paisa 60 per day per Rs 1000 or part thereof.
Given immediate effect, the facility shall remain valid up to June 30, 2015.
