ISLAMABAD: Taking about Rs92 billion liability on the public purse, Pakistan on Friday approved phasing out of the Rs330bn subsidised export financing scheme from the State Bank of Pakistan (SBP) to meet another condition of the International Monetary Fund (IMF) currently holding back the Staff-Level Agreement for disbursement of $1.1bn instalment.

The decision was made at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, presided over by Finance Minister Muhammad Aurangzeb, and attended by three other ECC members — ministers for petroleum, power, and investment.

On the request of the Ministry of Finance, the “ECC decided that the State Bank of Pakistan’s Long-Term Financing Facility (LTFF) portfolio of Rs330 billion would be phased out to the Exim Bank, with an allocation of Rs1.001bn through a Technical Supplementary Grant to meet the LTFF subsidy requirement for the new portfolio for FY25”, said an official statement.

With the consent of the IMF and under the phasing out plan of the LTFF to Exim Bank, “SBP’s portfolio of Rs330 billion is to be taken over by the Exim Bank. Alongside, fresh/additional LTFF portfolio of Rs210bn is also to be executed by the Exim Bank”, according to the summary of the finance ministry.

Exim Bank to take over State Bank’s Rs330bn LTFF portfolio

The Exim Bank will process subsidy claims and disburse accordingly as a government agent. “The cost to be borne by the government for meeting the subsidy requirements on account of both existing and fresh portfolio is estimated at Rs91.466bn,” the ECC was informed.

The Exim Bank was established under the Export-Import Bank of Pakistan Act 2022 to facilitate the expansion of exports and enhance import substitution. Conventionally, to expand and incentivise exports, the SBP has been giving refinance facilities under the Export Finance Scheme (EFS) and LTFF in both commercial and Islamic banking modes since 2007.

However, under the IMF Extended Fund Facility (EFF), one of the commitments pertained to phasing out of SBP’s operational involvement in the refinancing schemes and it was agreed that the said schemes are to be executed through Exim Bank.

In consonance with its mandate, the process for phasing out of SBP’s EFS portfolio to Exim Bank is underway as per the term sheet approved by the ECC and the Cabinet in 2023 that required subsequent phasing out of LTFF.

The refinance schemes have been available to exporters since 1973 through SBP.

“To improve monetary policy transmission mechanism of SBP, Pakistan under its Stand-By Arrangement (SBA) has agreed with the IMF to phase out refinance schemes within five years starting from the current financial year up till 2028,” the ECC was informed.

A working group with representatives from the Ministry of Finance, the Ministry of Commerce, the Securities and Exchange Commission of Pakistan, SBP and Exim Bank has devised a ‘phase out’ plan.

“The plan was shared and subsequently agreed to by the IMF”, the ECC was told. Exim Bank, as a disbursing agent of the Ministry of Finance, will process the markup subsidy claims of financial institutions and investment bond investors and disburse the subsidy on behalf of the federal government.

Supplementary grants

The ECC also approved four supplementary grants of Rs3.4bn. These included Rs2bn to the Ministry of Information for payment of outstanding advertisement dues to media houses, Rs430m for parliamentarians schemes in Punjab and Rs250m for operations of the Jinnah Medical Complex & Research Centre (JMC&RC) Company in Islamabad.

This JMC&RC allocation will support the establishment of a state-of-the-art 1,000-bed academic medical centre in Islamabad. However, the ECC directed the JMC&RC Company to provide a detailed breakdown of the expenditures and activities to be covered by the approved Rs250m before seeking further allocations.

The ECC also approved a supplementary grant of Rs24.556m (equivalent to $87,671.21 at an exchange rate of Rs280.1) to Mrs Lia Bomba of JAED Textile Pvt Ltd, Sydney, Australia, in compliance with the specific instructions of the Supreme Court of Pakistan on March 19.

Mrs Bomba had ordered some textile imports from Pakistan, which the local supplier did not fulfil. She started litigation, with the ultimate responsibility falling on the government for the lapse because of insecure systems. The Supreme Court of Pakistan ordered immediate payments to satisfy an international client.

Published in Dawn, March 22nd, 2025