Karachi July 7 2023: The total investment that Temporary Economic Refinance Facility (TERF) triggered is estimated at over PKR 800 Billion says The Pakistan Business Council.
TERF was the single most effective initiative taken by the SBP to kick start industrialization, especially during Covid when the investment sentiment was weak. Investment level in Pakistan has lagged behind our neighbours and even Textiles, the country's largest export earner was in need of modernization to remain competitive, Pakistan Business Council states.
TERF is a concessionary refinance facility aimed at promoting investment both new and expansion and/or Balancing, Modernization and Replacement (BMR). Financing under the facility is available through banks/DFIs to all sectors across the board except power sector where SBP’s refinance facility for renewable energy projects already exists.
There were also other sectors that invested to upgrade capacity to replace imports. It is a misconception that money was made available free of cost. A concessionary fixed rate applied for a term of 10 years, allowing PKR 425 billion to be approved for investment in local and imported plant and machinery through letters of credit. It did not cover investment in land and buildings. With that, the total investment that TERF triggered is estimated at over PKR 800 billion.
Commercial banks carefully vetted each project before opening letters of credit. The PKR 425 billion provided under TERF along with all other Covid related concessions and facilities, pale in comparison to those provided by many countries for their industries. It needs appreciation instead of criticism, the statement added.
TERF was a bold move and like other long term investments, will take time to produce positive returns for the country.