SBP reduced the markup on TERF and LTFF

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The State Bank of Pakistan (SBP) in a statement on Wednesday announced that it has reduced the end-user mark-up rate on the Temporary Economic Refinance Facility (TERF) and Long Term Financing Facility (LTFF).

TERF markup rate is now reduced to 5% from the existing 7% and on the Long Term Financing Facility (LTFF) is reduced for the non-textile sector to 5% from 6%.

The central bank said the decision was aimed at extending benefits of the reduction in policy rate to the users of refinance schemes and to promote investment in the country.

Detailing about TERF, the central bank said the scheme was introduced to provide stimulus to the economy by supporting new investment and balancing, modernisation and replacement (BMR) of the existing projects.

To further improve incentives under the scheme, the SBP lowered the end-user mark-up rate from the existing 7% to 5%. It would now provide refinance to banks at 1% with maximum bank margin of 4%, it said.

“Under this scheme, Rs10.5 billion had been approved by banks for 21 projects till July 2, 2020.”

On the other hand, it said, the LTFF was one of the oldest refinance schemes of the SBP, under which financing was available to export-oriented projects for the purchase of imported and locally manufactured new plant and machinery.

In March 2020, the SBP opened the LTFF for all sectors. Earlier, the end-user mark-up rate under the scheme was 5% for the textile sector and 6% for the non-textile sector.

“The State Bank has now reduced its refinance rate for the non-textile sector by 1% and, therefore, the end-user rate for all sectors across the board will be 5%,” it said.

The central bank emphasised that both measures would help facilitate long-term investment in domestic and export markets.

Source: Express Tribune