In keeping with the main policy rate, the State Bank of Pakistan (SBP) increased the markup rates for export financing by 200 basis points.
The difference between the policy rate and the Long-term Financing Facility (LTFF) and Export Finance Scheme (EFS) was reduced from 5% to 3% by the central bank.
With effect from December 30, 2022, markup rates for financing under EFS (Part-I & Part-II) and LTFF will increase from the current 11% per annum to 13% per annum each.
The markup rates for EFS and LTFF would be automatically updated going forward with any change in the SBP policy rate to keep the difference between the policy rate and EFS and LTFF rates at 3%, according to the central bank.
The interest rates on working capital loans and plant machinery have increased as a result of the most recent SBP action.
Up until March 2022, the rates for the EFS and LTFF schemes were set at 3-5%. The SBP connected the EFS and LTFF rates to its policy rate on July 7, 2022.
Last month, the SBP increased the policy rate by 100 basis points to 16% in an effort to carefully balance preserving growth after floods with controlling inflation. On January 23, the central bank is expected to publish its forthcoming interest rate decision.
As long as inflation stays high, analysts anticipate the SBP to retain its tight monetary policy in the second half of this fiscal year.
Exports and the expansion of private sector credit are predicted to be impacted by the increase in borrowing costs.
According to the SBP’s most recent monetary policy statement, private sector credit continued to decline in accordance with the downturn in economic activity, rising only by Rs86.2 billion during the first quarter compared to Rs226.4 billion during the same period previous year.
According to the report, the slowdown in consumer finance and the large fall in working capital loans to services provided by the wholesale and retail trade as well as the textile industry were the main causes of this slowdown.
