By Muhammad Abid
KARACHI: The State Bank of Pakistan (SBP) has opened up its subsidized Temporary Economic Relief Facility (TERF) for Balancing, Modernization and Replacement (BMR) and expansion of existing projects. The measure has been taken to provide further stimulus to the economy in the context of COVID-19 impact on the economy, to support investment in the country for modernizing or expanding manufacturing / production units, and in response from feedback from stakeholders, said yesterday.
Since the outbreak of COVID-19, SBP has taken several measures to safeguard economic activity in the country. On March 17, 2020 SBP introduced TERF and its Shariah compliant version to stimulate new investment in manufacturing sector.
Under the scheme, SBP provides refinance to banks for their onward extension of financing at maximum end-user rate of 7 percent for 10 years. The maximum financing for a single project under the scheme is Rs. 5 billion. The objective of this facility is to boost economic activity through investments in manufacturing units.
While allowing BMR and expansion of existing projects, SBP has allowed financing for purchase of new imported and locally manufactured plant and machinery against foreign LC and inland LC. The funding under the facility cannot be used for procurement of second-hand machinery, land or carrying out civil works. Further, SBP has also introduced additional internal and external checks and controls to ensure proper utilization of funds.
With expansion in scope of the facility, SBP expects that existing businesses will avail this subsidized funding to improve productivity of their business projects leading to higher economic activity and employment generation.