One of the government’s promises to the IMF was to phase out the state bank’s operational involvement in refinancing schemes.

The federal government of Pakistan has approved the phase-out of the rs330 billion subsidized export financing scheme from the State Bank of Pakistan, fulfilling another condition of the IMF. The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet chaired by Finance Minister Muhammad Aurangzeb, which was attended by three other members of the ECC, the Minister for Petroleum, The Minister for Power and the Minister for Investment. The portfolio will be transferred to Exim Bank in a phased manner, allocating more than Rs1 billion through a technical supplementary grant to meet staff subsidy requirements for the new portfolio for the current financial year.

According to the finance ministry’s summary, a portfolio of Rs 330 billion of the SBP will be handed over to Exim Bank with the consent of the IMF and as part of LTFF’s plan to phase out Exim Bank, in addition to the implementation of a new or additional LTFF portfolio of Rs 210 billion by Exim Bank. Exim Bank will process subsidy claims, and distribute accordingly as a government agent. The participants of the meeting were informed that due to the existing and new portfolio, the cost of more than Rs 91.46 billion has been estimated to the government to meet the requirements of subsidy, Exim Bank export-import Bank of Pakistan Act 2022 was established to expand exports and increase the substitution of imports. Since 2007, SBP has been providing refinance facilities through both commercial and Islamic banking under the Export Finance Scheme (EFS) and LTFF.

However, it is being told that one of the promises under the IMF Extended Fund Facility (EFF) was to phase out the operational involvement of the SBP in refinancing schemes, the refinance schemes have been available to exporters through the SBP since 1973, but now it was agreed that the said schemes would be executed through exim bank, ECC and cabinet According to the term sheet approved by THE BANK in 2023, the process of transferring the EFS portfolio of the SBP to Exim Bank is underway, after which the LTFF needed to be phased out.