KARACHI: The State Bank of Pakistan (SBP) has increased the export financing markup rate by 200 basis points as per the key policy rate.
In a circular issued on Thursday, the central bank decided to reduce the spread between the policy rate and the Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF) to 3% from the existing 5%.
“Accordingly, the markup rates for financing under EFS (Part-I & Part-II) and LTFF have been increased from the existing 11% per annum to 13% per annum with effect from December 30, 2022.”
The central bank added that with any future change in the SBP policy rate, the markup rates of EFS and LTFF will be automatically revised so that the difference between the policy rate and the EFS and LTFF rates remains at 3%. Keep up.
With the latest move by the State Bank, interest rates on working capital financing and plant machinery have been hiked.
Rates on EFS and LTFF schemes are fixed at 3-5% till March 2022. On July 7, 2022, SBP linked EFS and LTFF rates to its policy rate.
The SBP had last month hiked the policy rate by 100 basis points to 16% to strike a balance between maintaining growth and managing inflation after the floods. The central bank is scheduled to announce the next interest rate decision on January 23.
Analysts expect the SBP to maintain a tight monetary stance in the second half of the current fiscal year as inflation continues to pick up. The policy rate is likely to increase by 100 bps to 17% in the first quarter of 2023.
Increase in borrowing cost is expected to affect exports and private sector credit growth.
In line with the slowdown in economic activity, private sector credit continued to moderate, increasing by only Rs 86.2 billion during the first quarter, compared to the same period last year, the SBP said in its latest monetary policy statement. 226.4 billion during the period.
The decline was mainly due to a significant reduction in working capital loans to wholesale and retail trade services as well as to the textile sector in the wake of lower domestic cotton production and a slowdown in consumer finance.
