Manila, Philippines (BBN)- The Asian Development Bank (ADB), International Finance Corp. (IFC), Citibank, and Pakistan's MCB Bank announced on Wednesday that they have completed a landmark trade transaction that will help boost the textile industry in Pakistan, a sector that accounts for over 60% of the country's industrial activity.
The four banks provided trade finance coverage of up to €110 million for Ibrahim Fibers Limited to import state-of-the-art German machinery to produce polyester staple fiber and polyester chips. The additional 650 tons-per-day capacity made possible by the transaction will more than double Ibrahim Fiber's polyester production, already one of Pakistan's highest, to 1,250 tons per day.
By providing guarantees that cover the payment risk in trade transactions, ADB's Trade Finance Program and IFC's Global Trade Finance Program help increase trade finance and the flow of goods to and from emerging market countries.
For this transaction, IFC assumed 30 percent of MCB Bank's risk, and ADB 19 percent. Citibank managed the balance against the original letter of credit established by MCB Bank, an ADB press statement said.
"The cover arranged by IFC, ADB, and Citibank portrays the high degree of confidence these leading global financial institutions have in MCB," said Farooq A. Khan, Head of Trade Products Division at MCB Bank.
In 2010, ADB's Trade Finance Program supported over $600 million of cross-border trade in Pakistan. Over the past six months, IFC has provided Pakistani banks with $328 million in trade finance guarantees, a $125 million increase in guarantees compared to the same period last year.
BBN/SI/AD-05Jan11-9:04 pm (BST)
