F.P. Report
KARACHI: State Bank of Pakistan has issued three Shariah Compliant Refinance Schemes that are expected to provide level playing field to the Islamic banking industry. Currently, SBP offers various subsidized refinance facilities to the banks / DFIs to channelise the funds into priority sectors.
It is worth mentioning here that Shariah compliant Islamic Export Refinance facility and Islamic long term financing facility for the exporters are available to the Islamic banking industry.
However, addition of Shariah compliant financing facility for Renewable Energy, financing facility for storage of agricultural produce and Refinance facility for modernization of SMEs will meet the long awaited demand of the industry, especially for the Agriculture and SME sectors.
Mudarabah based facilities would provide long term cheaper liquidity to the end users. The financing under Islamic financing facility for Renewable Energy will be available in two categories. These are (i)prospective sponsors desirous of setting up renewable energy power projects with capacity ranging between 1 – 50 MW and (ii) consumers willing to install facility using renewable energy source for generation of electricity ranging between 4 KW – 1 MW for own use and/or for supplying to the distribution company.
Islamic Financing facility for storage of agricultural produce will be available for setting up silos, warehouses and cold storages.
Refinance facility for modernization of SMEs will be available for purchase of new imported/ local plant & machinery for SMEs.
SBP clarification/rebuttal
This is with reference to the story entitled ‘Pakistan has come out of financial crisis: SBP governor’ published on 19th February, 2019 and the editorial entitled ‘SBP governor’s remarks’ published on 20th February, 2019 in an English daily.
To put the record straight, the factual position is rather different from the insinuations attributed to Governor’s interaction with the press. In fact, the conversation reported in the story and the editorial attributed to the Governor SBP are misleading. We strongly urge you to visit the recording to confirm the conversation (see the link at Local Link |Youtube).
More specifically, the news items contain two contentious assertions attributed to the press conference: (i) ‘Governor of the State Bank of Pakistan Tariq Bajwa has said the country has come out of the financial crisis with the help of friendly countries and the economy has been set on the right path,’ and (ii) a different editorial goes on to comment ‘The State Bank Governor raised more than just a few eyebrows when he said at a private event that Pakistan’s economy had come out of a financial crisis.’ Both these assertions are unfactual and rebutted by SBP. The Governor Tariq Bajwa never used the term ‘financial crisis’ during the entire press conference.
Further, assuming these premises the editorial goes on to claim inconsistencies between SBPs monetary policy statements and its quarterly/annual reports, and the purported statements of the Governor at the press conference. You will appreciate that publishing a story and editorial without fully verifying the facts, particularly during the times in which important stabilization measures are working their way through the economy, weakens public confidence while unhinging expectations.
On the question of whether the Federal Government had crossed the limit set for SBP borrowing, the Governor had only clarified that that the law i.e. Section 9C of the SBP Act does not set any limit on Government borrowing from the State Bank.
He further explained that under the said law GOP was required to bring its SBP borrowing to zero at the end of each quarter and if it does not then the Finance Minister has to make a statement on the floor of the house.
This was a clarification given on a specific question and in no way changes the SBP stance that borrowing from SBP is more inflationary than borrowing from commercial banks.
