EXPORTS GAINING MOMENTUM
CONSIDERABLE IS UPWARD TREND IN TEXTILES, CLOTHING & AGRO FOOD
Apr 19 - 25, 2010
Pakistan's exports apparently gaining momentum reflected in the growing volumes sending a positive signal that the country has overcome the challenges posed by the global recession.
The exports in March stood at US$1.807 billion as compared with US $1.312 billion in March 2009, registering a 37.8 per cent increase over the corresponding month of last year. The export performance in March has been the highest recorded in any month of the current year as well as for the corresponding month of the previous five (5) years.
It is also important to note that exports during the months December thru March 2010 have grown at an average of 28.3 per cent over the corresponding period of 2009, which gives encouragement to the thought that the recession is officially over for Pakistan. It is also safe to predict that Pakistan's exports for the financial year 2009-2010 will overshoot the target of US$18.868 billion.
In fact if the current trend continues, and it is fair to assume that it will, the exports of Pakistan are well on course to break the US$19 billion threshold achieved in the year 2007-2008.
A closer look at the sectoral trends of exports for the year 2009-2010 reveals that Textiles and Clothing, Agro Food and Metals & Minerals have shown an upward trend over the previous year. The main drivers of this growth are Raw cotton, Cotton yarn, Art silk and synthetic textiles, readymade garments and towels in the Textiles and Clothing sector; Rice, Fruits and vegetables have made big advances in the Agro Food sector; whereas Jewelry in the Metals and Mineral sector has grown by a massive 70 per cent during the period July to February 2010 over the same period of the last financial year.
The Global recession which resulted in the shrinkage of the western and developed economies by approx 5 per cent on an average in the year 2009, saw the developing economies maintain a robust growth averaging 6 per cent. This phenomenon has also had a positive impact on the geographic diversification of Pakistani exports, so that Pakistani exports to Asia accounts for 45 per cent of total exports from Pakistan.
Asia has therefore emerged as the largest market of Pakistani goods. The Trade Development Authority of Pakistan is now doubling its levels of participation in Asian markets through increased delegations, exhibitions and other facilitations for Pakistani exporters to take advantage of opportunities in Asian countries.
EXPORT FINANCE SCHEME
Under the Export Finance Scheme (EFS), the central bank has extended a mandate to the commercial banks with the limits of Rs228 billion of which the amount outstanding under the scheme was Rs193.0 billion till March 2010.
In order to encourage high performing exporter availing EFS loans under Part-II, the SBP has introduced a performance based mechanism where mark up refund is given ranging from 0.5 per cent to 1.5 per cent depending on the performance achieved.
In fact, the mark-up rates under Export Finance Scheme were linked with the weighted average yields on six months T-Bills w.e.f 2001.
The existing 6 Months T-bill rate is around 12 per cent. However, the rate was fixed at 7.5 per cent since July 14, 2006 so that the exporters may remain competitive in international markets. "Presently the rate has been fixed at 9 per cent, which is still much lower than the rate as per prescribed criteria, Kamran Shehzad, deputy governor SBP said.
Under the Long Term Financing Facility (LTFF), the State Bank has allowed a grace period of one-year in the repayment of principal amounts on the outstanding financing under the Long Term Financing schemes.
Kamran Shehzad, deputy governor SBP said that under the Long Term Financing Facility, limits of Rs19.5 billion were assigned to various participating financial institutions and the outstanding amount under LTFF as on March 15, 2010 was Rs13.4 billion.
There is no double export performance required under EFS Part-II. Since one loan is availed twice a year, therefore required performance is equal to total amount of loan availed during the year.
The central bank is ensuring availability of adequate credit to private sector to promote economic growth on the sustainable basis. Addressing members of the Surgical Instrument Manufacturers Association of Pakistan, he said the State Bank has proactively taken a number of initiatives to facilitate industrial growth through export promotion. In this regard, the State Bank has issued a well-defined set of prudential regulations for banks which inter alia provides for credit and risk exposure limits, guidelines relating to classification of loans etc.
The exporters of surgical goods availed Rs2.4 billion of the financing provided under the export finance scheme so far.
Under the latest initiatives of SBP to facilitate industrial growth, the SBP has switched back to 100 per cent refinancing under its Export Finance Scheme and Long Term Financing Facility, providing banks with the much needed liquidity and allowing exporters easier access to credit at lower interest rates.
Referring to the development of SME Sector in Pakistan, he said that SBP has introduced a Scheme for Modernization of SMEs - Cotton Ginning & Rice Husking Factories in the second half of 2009. Financing under the Scheme is available at 8, 9 & 10 per cent for 3, 5 &7 years respectively, for import/local purchase of new plant & machinery for BMR only. 'The scope of the Scheme is being considered for coverage of other growing SME Sectors including Surgical Instruments, Sports Goods, and Cutlery', he added.
SBP Deputy Governor assured members of the Surgical Instrument Manufacturers Association of Pakistan that the central bank would extend full support to them as 'we all are working towards a common goal of economic growth and prosperity of the nation.'