These are drastic times, requiring dramatic action.
The linchpin of the global economy, international trade, is expected to decline this year for the first time since 1982. IFC and other international organizations must do all they can in response: keeping trade flowing is essential to saving jobs and curbing the impact of the crisis on people in the developing world.
As global conditions worsened in September and October 2008, Pakistan faced its own crippling combination—political uncertainty, a balance of payments crisis, and a country rating downgrade. Foreign bankers grew especially wary. Many raised rates and cut their country exposure dramatically, leaving Pakistani banks hard-pressed to support clients’ short-term import and export transactions.
Suddenly many of Pakistan’s largest private financial institutions needed another solution to their trade finance needs. IFC stepped in, providing seven Pakistani banks with a combined $140 million in guarantees since September 2008 to support transactions in agricultural products, oil, iron, and other industrial sectors—playing an important role in the broader economy at a critical time.
IFC has provided its most active local trade finance client, Habib Bank, with $58 million in guarantees to keep things moving during this period. This has supported 17 different transactions, including some with small and medium enterprises in the all-important textile industry. It means smaller producers in Karachi, Faisalbad, and other cities can still import essential raw materials and equipment, ship their yarn, cloth, and fabric to buyers overseas—and keep their people employed.
As with all other transactions in our Global Trade Finance Program, the Pakistan guarantees have seen no defaults. We are now increasing the program substantially, attracting more private Pakistani banks and many others in an initiative that will underpin $18 billion in trade globally over the next three years, most of it with small and medium enterprises in frontier market countries.
