Because funds in the "global trade finance liquidity pool," mainly for short-term use, can be rolled over, the facility could generate an additional $50 billion a year, the source said after a meeting of experts from commercial banks, export-credit agencies and international financial institutions hosted by the World Trade Organization.
The price of trade finance remains much higher than usual, with the best banks in India paying 120 basis points over LIBOR but some banks in Central Asia paying several thousand basis points, the source said. Before the crisis trade letters of credit were paying about 15 basis points over LIBOR.
0:00/1:27Global job losses mountWhile trade finance has improved for China, it remains a problem in many Asian countries and there is a huge need of trade finance for Africa, the source said.
Trade finance for commodities such as energy and other raw materials is less of a problem because many facilities were taken out several months ago when prices were higher, the source said. Since then prices have fallen and the recession has depressed demand, freeing up some funding.
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