KARACHI: In order to give impetus to development in sectors, which are central to economic development and there recent dormant performance has been a cause of concern, the government has announced special initiatives in agriculture and export sectors.
Government has decided to set up the Export-Import (EXIM) Bank of Pakistan to enhance export credit and reduce cost of borrowing for exporting sectors on long term basis and help reduce their risks through export credit guarantees and insurance facilities. The bank will provide liquidity to exporters.
The Government, through the State Bank of Pakistan, has arranged to reduce its mark-up rate on exports finance from 9.4% to 7.5%; the government, through the State Bank of Pakistan has arranged to reduce its mark-up rate on long term financing facility for 3-10 years duration from around 11.4% to 9% w.e.f 1st July 2014; a tariff rationalization program, being announced in the present budget, will gradually remove the anti-export bias in country’s tariff policy and make exports more competitive.
The Export Development Fund (EDF) Board has been reconstituted and its organization is overhauled with a view to make it more responsive and effective for the benefit of exporters.
The government has planned to incentivize exporters as draw-back for local taxes and levies to be given to exporters of textile products on FOB values of their enhanced exports if increased beyond 10% (over last year’s exports) at the rates: o Garments 4%, Made ups 2%; and Processed fabric 1%.
Mark up rate for Export Refinance Scheme of State Bank of Pakistan is being reduced from 9.4% to 7.5% from 1st of July 2014. The Expeditious Refund System is being improved and a fast track channel for manufacturers-cum-exporters is being created. Duty-free import of textile machinery will be allowed till June 30, 2016.
Agriculture occupies a central position in country’s economy as besides contributing more than 21% to GDP it houses more than 65% of population and employs nearly 45% of our labor force.
The government is introducing Credit Guarantee Scheme in order to encourage banks for financing to unbanked small farmers. Government, through the State Bank of Pakistan, will provide guarantee to commercial, specialized and micro finance banks for up to 50% loss sharing. The scheme will cover farmers having up to 5 acres irrigated and 10 acres non-irrigated land holdings. It will benefit 300,000 farmer households/families with a loan size up to Rs.100,000. Total disbursement under this scheme will be Rs.30 billion.
In order to cover the risk to various crops the Government has introduced the crop loan insurance scheme for farmers with landholdings of 12.5 acers. From this budget, the scope of CLIS premium reimbursement is being enhanced up to 25 acres. All farmers obtaining loans for production of 5 major crops are eligible to benefit from this scheme. Total budget cost of the scheme is Rs.2.5 billion.
In order to mitigate the risk of losses of small livestock farmers, the Government is introducing the Livestock Insurance Scheme for all farmers getting financing for up to 10 cattle. An allocation of Rs.300 million has been made in the current budget for the scheme.
The previous government levied sales tax on tractors which w.e.f. 1st January 2014 stands enhanced to 16%. This has adversely affected local buying of tractors. To encourage use of tractors by the growers it is proposed that the sales tax will continue to be charged at the reduced rate of 10%.
Credit to agriculture is critical for enhancing famers’ productivity. The State Bank has now decided to enhance overall credit to Rs.500 billion for the year 2014-15. With increased credit availability, and various insurance schemes, farmers’ problems with respect to access to financial sector will be addressed to a large extent.
In some parts of the country, such as in Makran Division, Gilgit-Baltistan, Swat District and FATA regions, agriculture produce suffers great losses for lack of processing and transport facilities. To encourage establishment of processing units at such places, Government is introducing a policy to support processing projects in Makran, Gilgit-Baltistan, Swat Valley and FATA.
These units will enjoy duty and tax-free import of machinery not locally manufactured and will also have access to SBP LTF facility and 5 years tax holiday. Additionally, a concessionary long-term financing facility shall be provided to them through State Bank of Pakistan.
Government has also decided to provide 50% airfreight subsidy for horticulture produce from Gilgit-Baltistan.