The government on Monday approved a subsidy of Rs98 billion to provide highly cheaper loans to exporters, including 10-year loans at a fixed 5% rate, to give yet another push to exports that fell 6% in the last fiscal year despite numerous incentives. The total estimated subsidy impact of such export schemes over 10 years at the existing interest rates is Rs270 billion. The government last month withdrew a subsidy of Rs76 billion given to pick the transfer cost of foreign remittances, underscoring its preference to promote exports over remittances.
Exports remained $11.5 billion less than remittances in the last fiscal year. The Economic Coordination Committee (ECC) also approved a grant of Rs4 billion to pay the litigation cost of various suits filed by the independent power producers (IPPs) in international arbitration courts, including a $2 billion claim by Saudi and Kuwaiti investors for blocking the divestment of K-Electric shares. Headed by Finance Minister Muhammad Aurangzeb, the ECC approved three schemes for exporters, recommended by the central bank for financial year 2026-27 and onwards.
For the current fiscal year, the ECC approved a subsidy of Rs98 billion for picking interest cost up to 11.5%. It approved enhancement in the Exim-administered Export Finance Scheme (E-EFS), the launch of a new Long-Term Export Growth Financing Facility (LTEGFF) and the Performance-based Rebate on Incremental Exports. A finance ministry statement said that the ECC approved three dedicated schemes for export enhancement.
The chairman directed that a six-month performance report be presented to assess the outcome of those schemes. Under the E-EFS, the government will provide working capital loans to exporters for six months at a rate of 8.5%. It will pick 5% interest cost, which will require a subsidy of Rs58 billion in the current fiscal year.
However, some of the ECC members recommended capping the maximum working capital limit aimed at diversifying cheaper loans. They also opposed the linking of incentives with non-traditional exports. The ECC approved an increase in the existing portfolio from Rs1 trillion to Rs1.5 trillion for the short-term scheme.
It agreed on the launch of LTEGFF, which would offer loans at a low interest of 2% for two years and a fixed 5% rate for the next eight years. The new scheme is aimed at providing long-term financing for the establ…
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