PBC urges innovation fromEXIM Bank to tap riskier markets

KARACHI: Pakistan's state-run Export-Import Bank (EXIM Bank), which became operational this week, will need to devise innovative solutions to promote exports of non-traditional items and tap into riskier markets in Africa and Central Asia, the Pakistan Business Council (PBC) said on Friday.

The PBC, a business policy advocacy group, said on the social media platform X that the EXIM Bank would have to balance its portfolio risk exposure between safer and riskier markets, as well as between large and small exporters.

"With a narrow export basket and heavy reliance on USA/EU/UK, the bank will need innovative solutions to target export of non-traditional items and to address the riskier markets of Africa and Central Asia," the PBC said.

"A challenge to overcome for the Bank would be to balance its own portfolio risk exposure between riskier and safer markets on the one hand and between large and SME clients, on the other."

The PBC said larger exporters are generally comfortable in dealing with leading chains and importers in the West. "For this they usually don’t require credit risk cover and will represent a very small percentage of the bank’s credit risk portfolio," it added

"On the other hand, smaller exporters to markets in Africa and Central Asia would be the banks clients for insurance. GOP (Government of Pakistan) would need to support the bank through EDF (Export Development Fund) or alternative sources, otherwise running an imbalanced risk portfolio would be difficult for the bank."

The caretaker government formally activated the Exim Bank on Thursday and declared that the export finance schemes, or EFSs, would be transferred to the Exim Bank after being gradually phased out from the State Bank of Pakistan as required by the International Monetary Fund's loan programme.

The Exim Bank would now oversee the operations of the EFSs, and the SBP would carry out regulatory tasks like eligibility and disbursement procedures. Exim Bank would assist exporters in boosting Pakistani exports' competitiveness internationally by providing financing, credit insurance, and guarantee services.

The PBC said that the EXIM Bank should benchmark its concessional lending rates with those offered to exporters in Bangladesh, India and Vietnam, which are Pakistan's main competitors in the global market.

"PBC has for long advocated the operationalisation of the EXIM Bank and is delighted that it will now be able to provide export credit as well as risk cover at rates comparable to those of Pakistan’s competitor sourcing countries."

Meanwhile, the Union of Small and Medium Enterprises (UNISAME) said if the Exim Bank of Pakistan performs as per its definition and according to international standards, it will play an important role in enhancing exports and also facilitate much needed imports of essential raw materials.

“The export credit guarantee and other guarantees of performance given by bidders to overseas importers both governments and private importers will boost our contractual exports. Besides guarantees it will also be able to manage the escrow accounts and also finance both exports and imports.”