ISLAMABAD: The Asian Development Bank (ADB) on Friday signed trade financing agreements with 5 Pakistan Banks, a move that would help country’s trade.

Under this agreement the LCs of these five banks would be accepted worldwide with the support (guarantee) of ADB. The Pakistani banks usually confront multiple problems while opening LCs in foreign countries. With the support of ADB, the LCs of these five Pakistani banks would be easily traded in foreign countries. The ADB increased funds for Pakistan from $150 million to $200 million on rolling basis on commercial interest rate.

ADB signed trade finance agreements with Allied Bank Limited, Bank AL Habib Limited, Habib Bank Limited, Meezan Bank Limited, and National Bank of Pakistan.

The agreements were part of ADB’s Trade Finance Facilitation Programme (TFFP). In response to the global economic crisis, the ADB recently expanded the programme to $1 billion from the previous $150 million for all member countries. Since many trade transactions could be rolled over at least once per year and since risk sharing draws in private sector resources, the expanded programme was expected to create around $15 billion in trade financing up to the end of 2013.

“Unlike other trade financing arrangements, the TFFP can provide support to both private sector firms and state-owned enterprises. “That means the trade support made possible by the new agreements should span all sectors of the Pakistan economy,” says Rune Stroem, Country Director of ADB’s Pakistan Resident Mission. “We expect some portion of the financing to be directed towards supporting oil imports, which are critical inputs to Pakistan’s exports and critical to the economy as a whole,” Stroem added.

Trade finance around the world had dried up as banks seek to bolster their own capital ratios and, accordingly, have shied away from lending to even the better international and domestic borrowers. “It’s essential that lenders like ADB work to support Pakistan businesses at this particularly challenging time for the Pakistan and the global economy,” says Philip Erquiaga, Director General, ADB’s Private Sector Operations Department.

Stroem further said other international banks not willing to lending in Pakistan banks but the ADB ready to do it. Under the TFFP programme, the ADB chief said finance provided by banks as a means of payment (or guarantee of payment) between importers and exporters. He said that the under the TFFP, Guarantees means, ‘a mechanism for providing mitigation against commercial and political risks associated with international trade in ADB’s development member countries (DMCs).

Through a presentation, Stroem said that the ADB’s TFFP was a reliable partnership in trade, even during crises. It would supports creation of new partnerships in trade between Pakistani and international entities.

An official informed Daily Times that six more commercial banks would also sign agreement with ADB soon.