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  • SBP allows extension in foreign currency loan settlement

    SBP allows extension in foreign currency loan settlement

    KARACHI: State Bank of Pakistan (SBP) has allowed extension in settlement of foreign currency loans to facilitate exporters and importers in wake of coronavirus pandemic.

    In a statement issued on Thursday, the SBP said that continuing with its commitment to support the industry amid COVID-19 pandemic, the central bank further facilitated the exporters and importers by allowing extension up to 180 days in settlement of their export and import loans under FE-25 Scheme.

    Banks can now allow extension up to 180 days to exporters in settlement of their FE-25 loans in case they are facing delay in realization of export proceeds due to COVID-19.

    Moreover, banks can also allow settlement of FE-25 loans to exporters through substitute contract during the extended period of 180 days where the original export contract has been cancelled due to COVID-19.

    Likewise, SBP has also allowed the bank to extend the maturity of FE-25 import loans by 180 days.

    This facilitation has been provided to exporter and importers for their foreign currency loans maturing up to September 30, 2020.

    State Bank reiterates its unflinching resolve to continue working with all stakeholders to provide all needed facilitation in these uncertain times in the larger interest of people of Pakistan.

  • Foreign exchange reserves increase to $19.655 billion

    Foreign exchange reserves increase to $19.655 billion

    KARACHI: The liquid foreign exchange reserves of the country increased by $137 million to $19.655 billion by week ended August 13, 2020, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $19.518 billion by week ended August 07, 2020.

    The foreign exchange reserves held by the central bank also increased by $139 million to $12.608 billion by week ended August 13, 2020 as compared with $12.469 billion a week ago.

    The SBP attributed the increase in reserves to proceeds of $249.4 million from Asian Infrastructure Investment Bank (AIIB). Meanwhile, during the week, SBP also made government external debt repayments of $151.0 million.

    The foreign exchange reserves held by commercial banks slightly down by $2 million to $7.047 billion by week ended August 13, 2020 as compared with $7.049 billion a week ago.

  • SBP allocates additional Rs190 billion refinancing to facilitate exporters

    SBP allocates additional Rs190 billion refinancing to facilitate exporters

    KARACHI: The State Bank of Pakistan (SBP) has allocated an additional amount of Rs190 billion under refinancing schemes for exporters during fiscal year 2020/2021, a statement said on Wednesday.

    In order to further facilitate the exporters, SBP enhanced the limit of refinancing provided to the banks under Exports Finance Scheme (EFS) by Rs100 billion.

    Hence, banks will now have overall limits of Rs700 billion for the exporters for 2020/2021.

    Moreover, to promote export-oriented investment, Rs90 billion have also been allocated under Long Term Financing Facility (LTFF) for the FY 21.

    This amount is in addition to limit of Rs100 billion already allocated to banks/DFIs under Temporary Economic Relief Facility (TERF) – a concessionary refinance scheme for setting up of industrial units, the SBP said.

    Export Finance Scheme and Long Term Financing Facility are two of the oldest schemes of SBP under which concessionary financing is provided to the exporters.

    EFS is operational since 1973 to meet short-term financing needs of exporters, while LTFF has been available 2008. For both the schemes, their Shariah compliant versions are also available.

    Since the emergence of Covid-19, SBP has taken several measures to counter its impact on the economy and safeguarding country’s exports has been a key priority. SBP has provided a number of relaxations under EFS and LTFF since March 2020 including:

    Additional period of six months for making shipment against loans availed under EFS Part-I.

    Additional period of six months for meeting required export performance against loans availed under EFS Part-II.

    The export performance of this extended period will also be considered for calculating the entitlement limit for 2020/2021.

    Reduction in showing export performance from 2 times to 1.5 times against financing availed during FY20 and FY21.

    Relaxation in the eligibility criteria for availing finance under LTFF.

    Allowing deferment of principal amount for one year and/or rescheduling/restructuring of loans under LTFF.

    It is expected that with the above already provided relaxations, which were widely appreciated by business community; above enhancement of around Rs190 billion in limits will cater to exporters’ cheaper liquidity requirement. SBP is closely monitoring the situation and is ready to take any further actions required to support the export sector.

  • Govt. to generate funds by issuing new Sukuk

    Govt. to generate funds by issuing new Sukuk

    KARACHI: The government has decided to generate funds through Islamic mode by reopening of Sukuk and in this regard the State Bank of Pakistan (SBP) on Tuesday issued necessary instructions and guidelines.

    The SBP said that subsequent to the issuance of first Ijarah Sukuk issue if the government is in need of additional funds and instead of issuance of a new Sukuk wishes to raise new funds by way of re-opening, then the State Bank of Pakistan will conduct an auction for reopening of the existing Sukuk Issue.

    In the Islamic context the steps of reopening of existing Sukuk is similar as that of issuance of a completely new Sukuk i.e. at the time of reopening of Sukuk the transaction is concluded by purchasing additional share in the identified asset on Musha basis which is then given on rent/ Ijarah and a separate Ijarah Agreement is executed.

    However, since the underlying asset, maturity date, rental rate and rental payout frequency is kept same as the initial issue, therefore the new issue would be called re-opening of Sukuk instead of a new Sukuk issuance.

    The transaction flow for the re-opening of Sukuk would be same as that of an approved structure of the fresh Issue which is re-defined briefly in the following few lines:

    At the time of reopening of Sukuk, a fresh Purchase Agreement would be executed between Pakistan Domestic Sukuk Company Limited (PDSCL) (on behalf of Investors) and GOP at an agreed purchase price for the purchase of a new/additional share in the asset.

    Subsequently PDSCL (on behalf of Investors) and GoP would enter into an Ijarah Agreement wherein the new / additional assets would be leased to GoP for a fixed period which would be ending on the scheduled maturity date of the first issue.

    The other agreements as mentioned in the Shariah Structure of first issue would also be executed simultaneously.

    However, the structure of reopening of Sukuk might differ from the structure of the first issue in ways as elaborated below.

    The distinguishing features of the re-opening structure are as follows:

    • For the first rental period the rental amount of the reopened Sukuk in absolute terms would be the same as the first issue. However, for subsequent period, the Rental Rate for the reopened Sukuk would be same as that of the first issue. Similarly, the maturity of the re-opened Sukuk would also be same as the first issue

    • For the determination of the Bid Price the Investors at the time of re-opening would take into consideration the known Rental Rate (in terms of benchmark), the remaining tenor of the issue and the higher first rental amount. The Purchase Price (at which settlement will take place) would have the following three components which can be referred to individually or collectively for the reporting purpose:

    i. Face value of Sukuk

    ii. Market premium/ discount

    iii. Price premium due to higher first rental

    The component (iii) mentioned above is based on the rental rate determined in the fresh auction and/or start of last rental period; hence will be known to the investor.

    The investors would bid in the auction on the price for re-opening of the Sukuk, which may be at premium or discount based on market conditions, considering component (i) and (ii) mentioned above.

    The component (iii) will be added to the Cut-off Bid Price (as per auction result) for determining purchase price at which settlement will take place.

    • On completion of the bidding, the Purchase Agreement for the purchase of new/additional asset between PDSCL (on behalf of the Investors) and GoP would be executed at purchase price.

    • The Sukuk would be recorded in the books of accounts at Absolute Auction Price i.e. the purchase price without any adjustment. ‘However, for reporting purpose the above identified 3 components of the Purchase Price may be recorded separately or collectively as required.

    • In case the date of Ijarah Agreement lies in between the two rental payment dates of the original issue, then the first rental period would be of a period less than 6 months. In this case the first rental amount for the reopened sukuk would be communicated to the lessee in absolute terms. This rental amount would be equal in absolute terms with the corresponding 6-month rental of the first/ previous issue.

    • The full amount of first rental of the re-opened sukuk would be booked as rental income by the Investors without adjustment.

    • On the expiry of the first lease period subsequent to re-opening of Sukuk an Asset Comingling Declaration’ shall be executed by PDSCL (as trustee and agent of investors) on the last day of first rental period to inform GoP about the combined proportionate share of investors in the underlying asset.

    • Subsequently, a single rental notice referring to Comingled Assets shall be executed for subsequent lease periods.

  • Women entrepreneurs to get loan up to Rs5 million: SBP

    Women entrepreneurs to get loan up to Rs5 million: SBP

    KARACHI: The State Bank of Pakistan (SBP) has decided to enhance the limit of loan for women entrepreneurs up to Rs5 million from Rs1.5 million in order to encourage women participation in the economy.

    In a statement issued on Tuesday the central bank said that it had enhanced the financing limit under its Refinance and Credit Guarantee Scheme for Women Entrepreneurs from Rs1.5 million to Rs5 million.

    The decision has been taken in light of feedback received from various stakeholders about current financing limit being insufficient to cover the financing needs of women entrepreneurs, the SBP said.

    This decision is in line with the government policy to support and revive economic activities in the country and SBP’s key objective of improving access to finance for priority segments including women entrepreneurs.

    Initially in August 2017, State Bank had introduced Refinance and Credit Guarantee Scheme for Women Entrepreneurs in underserved areas to promote financial inclusion and access to finance for women entrepreneurs in the country.

    Subsequently, the scope of scheme was enhanced to cover whole of Pakistan.

    Under this scheme, SBP provides refinance to participating financial institutions at 0 percent on their financing to women entrepreneurs at maximum end user rate of 5 percent. Moreover, 60 percent risk coverage is also available to the participating institutions.

    The enhancement in financing limit under SBP scheme is expected to increase financial inclusion of women since more women entrepreneurs are likely to be attracted for setting up of new businesses or for expanding the scope of their existing businesses by availing concessional financing under SBP scheme.

  • Remittances hit monthly record high: SBP

    Remittances hit monthly record high: SBP

    KARACHI: The inflow of workers’ remittances hit monthly record high of $2.77 billion in July 2020, State Bank of Pakistan (SBP) said on Monday.

    In July, workers’ remittances rose to US $ 2.768 billion. “This is the highest ever level of remittances in a single month in Pakistan,” the SBP said.

    In terms of growth, remittances increased by 36.5 percent over July 2019 (y/y) and 12.2 percent over June 2020 (m/m). Given the impact of Covid-19 globally, this increase in worker’s remittances is encouraging.

    In July, sizeable amounts of workers’ remittances were received from Saudi Arabia (US $ 821.6 million), UAE (US $ 538.2 million), UK (US $ 393.9 million) and USA (US $ 250.6 million).

    The growth rate in remittances compared to the same month in the previous year is around twice as high as the Eid-ul-Adha related seasonality typically experienced over the last decade.

    Several factors have likely supported the growth in remittances to date, including orderly exchange rate conditions and policy steps taken by the State Bank and the Federal Government under the Pakistan Remittance Initiative. These steps include reducing the threshold for eligible transactions from USD 200 to USD 100 under the Reimbursement of Telegraphic Transfer (TT) Charges Scheme, an increased push towards adoption of digital channels, and targeted marketing campaigns to promote formal channels for sending remittances.

    To improve data quality and better capture the source country of the remitter, the compilation methodology for ‘country wise’ workers’ remittances has been strengthened from this month. Therefore, country-by-country trends will be available on a consistent basis from August 2020 onwards.

    Importantly, the new data collection method does not affect the reporting of the level of remittances arriving into Pakistan.

    Importantly, the revised country shares under the improved data do not necessarily imply that remittances from one country have increased over another. Instead they demonstrate that the source country of remittances is being recorded more accurately now.

  • Foreign exchange reserves eases to $19.518 billion

    Foreign exchange reserves eases to $19.518 billion

    KARACHI: The liquid foreign exchange reserves of the country have declined by $45 million to $19.518 billion by week ended August 07, 2020, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $19.563 billion by week ended July 30, 2020.

    The official reserves of the SBP slipped by $73 million to $12.469 billion by week ended August 07, 2020 as compared with $12.542 billion a week ago.

    The central bank attributed the decline in foreign exchange reserves to scheduled payment of external debt.

    However, the foreign exchange reserves held by commercial banks increased by $28 million to $7.049 billion by week ended August 07, 2020 as compared with $7.021 billion a week ago.

  • SBP allows transfer of up to $200,000 as payment for foreign digital services

    SBP allows transfer of up to $200,000 as payment for foreign digital services

    KARACHI: State Bank of Pakistan (SBP) has allowed banks to release a maximum amount of $200,000 per year as payment for digital services provided by foreign companies.

    The central bank on Thursday issued a new mechanism for payments to globally recognized digital service provider companies against acquisition of digital services by local companies for ease of doing business in the country.

    The SBP amended Foreign Exchange Manual and allowed general permission to banks to release foreign exchange up to a maximum of USD 200,000/-, or equivalent in other currencies, per year, for each company/ firm/ sole proprietorship incorporated/ established in Pakistan on account of commercial payments, pertaining to digital services, in favor of digital service provider companies.

    The release of payment is limited to foreign companies listed by the SBP, which are included:

    1.  Adobe

    2.  Affinity

    3.  Airtable

    4.  Alibaba Group

    5.  Amazon

    6.  Apple

    7.  AppLovin

    8.  Asana

    9.  Atlassian

    10.  Box

    11.  Calendly

    12.  Coursera

    13. Digital Ocean

    14. DocSend

    15. DocuSign

    16. Dropbox

    17. Expensify

    18. Facebook

    19. Figma

    20. FreshBooks

    21. Front

    22. GoDaddy

    23. Google

    24. Hootsuite

    25. Hubspot

    26. IBM

    27. Instagram

    28. Intercom

    29. InVision

    30. LinkedIn Corporation

    31. Mailchimp

    32. Marketo

    33. Mendix

    34. Microsoft Corporation

    35. Optimizely

    36. Oracle Corporation

    37. Pilot

    38. Pipe Drive

    39. Poynt

    40. Intuit/ QuickBooks

    41. Red Hat/ OpenShift

    42. Sketch

    43. Salesforce

    44. SAP SE / SAP

    45. SEMrush

    46. Shopify

    47. Slack Technologies/Slack

    48. Squarespace

    49. Tencent

    50. Trello

    51. Twilio

    52. Twitter

    53. Udacity

    54. Udemy

    55. VMware

    56. WhatsApp

    57. WordPress

    58. Xero

    59. YouTube

    60. Zapier

    61. Zendesk

    62. Zoom/ Video Communications

    The SBP said that the ultimate beneficiary of remittances should only be the company (including their affiliates or associated entities).

    However, up to a maximum amount of USD 25,000/-, out of the total annual limit of USD 200,000/-, can be remitted to those digital service provider companies which are not listed in the Appendix V 147, against acquisition of digital services.

    The remittances should only be made by an Authorized Dealer designated by the remitter for this purpose under acknowledgement to Foreign Exchange Operations Department (FEOD) SBP-BSC. No Authorized dealer will remit funds under this general permission unless it has been acknowledged as designated Authorized Dealer by the FEOD SBP-BSC.

    The SBP said that the banks will ensure that it has satisfied itself with the genuineness and bonafides of the applicant, through appropriate CDD and customer risk profiling, specifically in light of AML/CFT regulations.

  • Bank holiday announced

    Bank holiday announced

    KARACHI: State Bank of Pakistan (SBP) on Tuesday announced that the central bank will remain closed on Friday August 14, 2020 on account of Independence Day as declared by the government.

    In a circular issued to the presidents and chief executives of all banks, development financial institutions and microfinance banks, the SBP informed about the bank holiday.

  • SBP enhances loan limits to facilitate borrowers

    SBP enhances loan limits to facilitate borrowers

    KARACHI: State Bank of Pakistan (SBP) has enhanced limits of loans in various categories in order to facilitate borrowers to meet demand in present conditions.

    The central bank in a statement on Monday said that it had enhanced the limits for housing finance and microenterprise loans up to Rs3 million from the existing limit of Rs1 million for borrowings from the microfinance banks. Likewise, the maximum size of general loans has been enhanced from Rs150,000 to Rs350,000.

    Further, to commensurate with enhanced loan sizes, annual income eligibility for general loans and housing loans has been increased up to Rs1.2 million and Rs1.5 million, respectively. Moreover, the limit for lending against gold collateral to meet borrowers’ immediate domestic or emergency needs has also been enhanced.

    The decision to increase the limit of housing finance loans has been made in view of the fact that the existing loan limit was insufficient to promote low cost housing finance through MFBs. Similarly, limits for lending to micro enterprises needed to be enhanced considering the large unmet demand from Micro & Small Enterprise (MSEs).

    These initiatives would further support the micro borrowers and enterprises and an early revival of economic activities in the current challenging times. However, in order to ensure sustainability, the enhanced loans sizes for housing and microenterprises would be allowed to those MFBs which are on sound footing and have the capacity to successfully cater the higher loan sizes.

    In addition, SBP Relief Package for microfinance banks, which included deferment of principal and restructuring of microfinance loans to deal with the adverse implications of the ongoing Covid-19 pandemic, have now been expanded with three measures.

    First, the relief measures that were earlier available from Feb 15, 2020 have now been allowed to borrowers who were regular on December 31, 2019.

    This would allow more borrowers to avail the regulatory relief who were previously not eligible. Second, to facilitate MFBs during these testing times, the provisioning requirements have been extended by 2-months; and third, client’s consent through recorded lines has been allowed to facilitate the customers to avail the relief package.