| Type |
Political Risk Guarantee (PRG) facility guaranteeing payment to international banks confirming letters of credit (L/Cs) issued by Pakistan banks to finance imports of intermediate goods for eventual export. |
| Guarantee coverage |
PRG covers 100 percent of the obligations under each eligible L/C, provided that failure to pay by the issuing bank is caused by:
- currency inconvertibility or transferability blockage; or
- other agreed political risk events directly affecting payment.
|
| Counter-Guarantor |
Pakistan |
| PRG Facility Amount |
Maximum aggregate value of all L/Cs guaranteed under the Facility not to exceed $150 million. |
| Facility Agent |
Standard Chartered Bank (Dubai) was competitively selected as Facility Agent.1 It acts as a conduit between ADB and the confirming banks in administering and helping promote the Facility in Pakistan and overseas.Standard Chartered Bank (Dubai) was competitively selected as Facility Agent.1 It acts as a conduit between ADB and the confirming banks in administering and helping promote the Facility in Pakistan and overseas.Standard Chartered Bank (Dubai) was competitively selected as Facility Agent.1 It acts as a conduit between ADB and the confirming banks in administering and helping promote the Facility in Pakistan and overseas. |
| Availability Period |
Six years. During the availability period, new eligible L/Cs may replace the L/Cs that have matured. L/Cs may have a term of up to 360 days, but may on a case-by-case basis have a term of up to 3 years. |
| ADB Direct Participation |
Loan - $150 million to Pakistan for Foreign Currency Export Facility
Equity - $2 million invested in Pakistan Export Finance Guarantee Agency Ltd. |
| Rationale for ADB Guarantee Support |
At times of political uncertainty, offshore suppliers that sell much-needed imports to Pakistan have encountered difficulties in obtaining confirmation of L/Cs issued by Pakistan banks, or have done so at an exceptionally high cost.The PRG effectively mitigates Pakistan country risk, thus helping to keep Pakistan country limits open for international banks confirming import L/Cs issued by Pakistan banks during periods of political and economic uncertainty. The Facility should ensure that Pakistan exporters have continued access to trade finance and effectively reduce the cost of imports for export production, thus enabling Pakistan exporters to compete on terms similar to those of their international competitors (without being penalized unduly for Pakistan's country risk).
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