The announcement of relief efforts by the State Bank of Pakistan (SBP) is a source of relief for households, businesses and other stakeholders due to the economic slowdown driven by the spread of the coronavirus. Under this plan, the loaning ability of several banks across Pakistan will be increased along with a reduction in the Capital Conservation Buffer (CCB) from 2.50 percent to 1.5pc. This is a far-sighted approach that the Pakistan Tehreek-i-Insaaf (PTI) government is taking along with the SBP to facilitate small and medium enterprises (SMEs) in Pakistan, that will imminently be affected by the economic slowdown. The biggest variable in the picture is the duration of how long the virus will last in Pakistan; that will inadvertently impact these SMEs and they will need funds to revive their businesses.
For this purpose, the government needs to devise a very soft loan return plan because, at a time when these SMEs cannot rely on the market for funds, these loans will help them sustain their businesses at softer conditions because the aim of the government here is help sustain the market in these times. The government also plans to defer payment of principal on loan obligations by one year. This will not affect the borrower’s credit history, and the process of written applications to utilise this facility begins in June this year.
This is an exhibition of farsightedness by the government and must be appreciated. The government needs to also take all the stakeholders (SMEs) on board to ensure that they understand the policy being framed out to ensure that those being offered these facilities understand the conditions, work accordingly, and are able to meet the requirements set by the state to protect the local market. The SBP will monitor the situation as it evolves to be able to draft better policies given the requirement of the time.