To extend the benefits of a reduction in the policy rate to people using its refinance schemes, State Bank of Pakistan (SBP) has decided to align the end-user markup rates on two of its refinance schemes for promoting investment in the country.

SBP has curtailed the end-user markup rates on Temporary Economic Refinance Facility (TERF) to 5% from the existing 7% and on Long Term Financing Facility (LTFF) for the non-textile sector to 5% from 6%.

Temporary Economic Refinance Facility (TERF)

SBP introduced this facility to provide stimulus to the economy by supporting new investment and balancing, modernization, and restructuring (BMR) of the existing projects. To further improve the incentive under the scheme, SBP has lowered the end-user mark-up rates from existing 7% to 5%.

SBP will now be providing refinance to banks at 1% with banks’ maximum margin of 4%. Further, SBP has also allowed the TERF facility in cases where LCs/Inland LCs were opened but were retiring after the introduction of the scheme on March 17, 2020. These measures, in the backdrop of earlier policy action of allowing BMR under TERF, are expected to further support the economic activity, new long term investment, and employment generation.

Under this scheme, up till 2nd July 2020, Rs. 10.5 billion have been approved by banks for 21 projects.

Long Term Financing Facility (LTFF)

LTFF is one of the oldest schemes of SBP under which financing is available for export-oriented projects for purchase of imported and locally manufactured new plant and machinery. In March 2020 SBP opened the LTFF to all sectors across the board.

Earlier, the end-user markup rate under this scheme stood at 5% for the textile sector and 6% for non-textile sectors. State Bank has now reduced its refinancing rate for the non-textile sector by 1% and therefore the end-user rate for all sectors across the board will be 5%.

Taking cognizance of the fallout of COVID-19 the pandemic on the economy, the central bank has been taking steps to safeguard the businesses and households and a reduction in the policy rate has been a key step since March 2020. It has reduced the policy rate by 625 basis points from 17th March 2020 to 7 percent.

It is expected that the above measures will help facilitate long term investment in both the domestic and export markets.

The post SBP Reduces Refinance Scheme Markup Rate to 5% for Promoting Investment appeared first on .

Originally Published on ProPakistani.com

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