Pakistan: EFS & LTFF - How much increase in offing, to fill the Gap?

Export Refinance Rate:

Under IMF condition, EFS rates are linked with weighted average yields of last three auctions of 6 months T-Bill.

Current EFS rate: 10.00%

Current weighted average yields of last three auctions of 6 months T-Bill: 13.39%

Deadline to comply is September 2011, therefore SBP will jack up EFS rate sharply (approx 300 bps) this year to fill the gap at current W.A. yield of last 3 auctions of 6 mo. T-bill.

Long Term Financing Facility (LTFF):

Under IMF condition, LTFF Re-finance rates (for a period of 3-10 years) are linked with 3,5 and 10-year PIBs' weighted average yield of last 2 auctions.

	up to 3 yrs	3 yrs -5 yrs	5yrs-10yrs
Current LTFF	9.50%	8.60%	8.20%
Current W.A. yield of last 2 auctions of respective PIB’s tenure	14.0%	14.13%	14.13%

Deadline to comply is September 2011, therefore SBP will jack up LTFF rates sharply (approx 450bps – 550bps) this year to fill the gap at current W.A. yield of last 2 auctions of respective PIB’s tenure.

At the end of FY10, outstanding amount under EFS is PKR 178bn (2% Y-o-Y increase in FY10), while, outstanding amount under LTFF is PKR 43bn (13% Y-o-Y increase in FY10)

Increase of EFS & LTTF rate will be negative for all exporters, mainly for Textile & Rice exporters.