ISLAMABAD: Pakistan has established a Rs3 billion ($10 million) risk pool to expand export credit insurance, particularly for small and medium-sized enterprises (SMEs), as the government seeks to make exports a larger driver of economic growth.
Prime Minister Shehbaz Sharif welcomed the initiative on Saturday, saying the Export Development Fund (EDF) and Export-Import Bank of Pakistan (EXIM Bank) would provide insurance coverage to exporters through the facility, helping businesses manage risks and increase overseas sales.
The measure is part of a broader effort to move beyond economic stabilization toward sustained, export-led growth, with the government also seeking to improve private-sector investment, business competitiveness and access to international markets.
The Export Development Fund is a government-backed mechanism under Pakistan’s Ministry of Commerce that supports initiatives intended to address constraints facing exporters and improve the country’s export performance.
Under the latest restructuring, the government says the fund is shifting its resources toward measures such as research, skills development and improving competitiveness rather than additional infrastructure spending.
For smaller exporters, the new risk pool is intended to address one of the challenges of entering overseas markets: the financial risk associated with selling to foreign buyers.
Export credit insurance can protect exporters against specified risks, including non-payment by buyers, making it easier for businesses to accept international orders and, in some cases, obtain financing against those transactions.
Why SMEs are being targeted
SMEs account for a large share of businesses in economies around the world but can face greater difficulty accessing trade finance and managing the risks involved in international transactions.
The government says the Rs3 billion facility will therefore expand access to export credit insurance for smaller businesses and help them increase export volumes.
The initiative was announced alongside a separate reinsurance arrangement between Pak EXIM and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank Group.
The arrangement is intended to strengthen Pakistan’s capacity to provide export credit insurance and share risks associated with international trade.
Chairing a meeting on EDF reforms in Lahore, PM Sharif described the risk pool as a welcome step toward supporting SMEs and facilitating the business community in increasing exports.
He also praised the EDF for undertaking reforms aimed at strengthening the economy.
From stabilization toward export-led growth
The export-insurance initiative comes as the government places greater emphasis on private-sector investment, exports and business facilitation after a period in which economic policy was dominated by efforts to stabilize Pakistan’s external and fiscal position.
The government’s current approach combines measures to maintain macroeconomic stability with efforts to expand productive investment and exports. Finance Minister Muhammad Aurangzeb said this week that Pakistan had moved from stabilization toward growth, while stressing the need to make that growth sustainable.
The Special Investment Facilitation Council (SIFC) has also framed export-led growth and private-sector development as central to the government’s economic strategy. At a January meeting with business groups, the government said sustained economic recovery and export-led growth remained key objectives, supported by public-private cooperation and institutional facilitation.
SIFC has separately highlighted initiatives aimed at adding value to domestic production and expanding exports, including projects involving minerals, halal meat, agricultural products and other sectors.
The broader objective is to increase the value and diversity of Pakistan’s exports rather than relying primarily on a narrow group of traditional export sectors.
Rs24 billion EDF allocation
During Saturday’s meeting, officials briefed the prime minister on the restructuring and reforms of the EDF.
The briefing said the entire Rs24 billion available with the fund had been allocated for investment aimed at facilitating the business community.
No additional expenditure would be made on infrastructure, officials said. Instead, the EDF would focus on initiatives related to research, skills development and improving competitiveness.
PM Sharif said that following the restructuring, the EDF’s leadership had been entrusted to private-sector professionals and that the fund’s available resources were being used to facilitate businesses.
“These measures reflect the Government of Pakistan’s commitment to promoting the national economy and increasing exports,” the prime minister said.
He added that such initiatives would help Pakistan emerge as a global hub for investment and said the government’s measures were aimed at fulfilling its commitment to an export-led economy.
Access to European markets
The meeting was also briefed on measures concerning the extension of Pakistan’s preferential trade arrangement under the European Union’s GSP Plus framework, with the aim of maintaining access to the European market.
GSP Plus provides eligible developing countries with preferential access to the EU market in exchange for commitments under international conventions covering areas including human and labor rights, environmental protection and governance. Pakistan’s Ministry of Commerce lists GSP Plus among the trade arrangements central to the country’s export framework.
Maintaining access to major markets is particularly important as Pakistan seeks to expand exports and attract investment into export-oriented industries.
The government’s latest measures therefore combine risk coverage for exporters, investment in business-support initiatives and efforts to preserve preferential market access as it seeks to strengthen the country’s export base.