Pakistan phases out subsidized export financing scheme

Pakistan has approved the phasing out of a subsidized export financing scheme worth Rs330 billion. This decision helps meet another requirement set by the International Monetary Fund (IMF) for a $1.1 billion loan deal. The Economic Coordination Committee (ECC) made this decision during a meeting led by Finance Minister Muhammad Aurangzeb. The plan involves transferring the State Bank of Pakistan’s Long-Term Financing Facility (LTFF) to the Exim Bank. The government will allocate Rs1.001 billion to support the subsidy needs for the new portfolio in the upcoming fiscal year. The Exim Bank, which facilitates exports, will now manage the subsidy claims and distributions. The Exim Bank was established in 2022 and will take over the Rs330 billion portfolio from the State Bank. This change is part of Pakistan's commitment under the IMF's Extended Fund Facility, which aims to reduce the State Bank's role in refinancing schemes. These refinancing programs have been available since 1973. To further streamline financial operations, the ECC has agreed to phase out these schemes over five years, aiming for completion by 2028. A working group created a detailed plan, which was approved by both the ECC and the IMF. Additionally, the ECC approved several supplementary grants totaling Rs3.4 billion. This includes Rs2 billion for media advertisements and funds for a medical center in Islamabad. A small grant was also approved for a textile company following a Supreme Court ruling to settle an international payment issue.