KARACHI: The State Bank of Pakistan (SBP) has raised the mark-up rates of Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) by 200 basis points (bps) to rationalize with the key policy rate. The Monetary Policy Committee (MPC) of the SBP, in its meeting held on Monday for revision of policy rate, decided to raise the mark-up rates on EFS and LTFF loans aimed to strengthen monetary policy transmission.

In addition, the committee decided to link the EFS and LTFF mark-up rates with policy rate to adjust automatically. However, as per committee decision, the interest rates of EFS and LTFF loans will remain below the policy rate in order to incentivize exports.

Accordingly, SBP after the MPC meeting issued a circular to announce the increase in interest rates of Export Finance Scheme (EFS)/ Islamic Export Refinance Scheme (IERS) and Long-Term Financing Facility (LTFF)/ Islamic Long Term Financing Facility (ILTFF).

Financing under EFS: Markup rate raised by 2.5pc

The committee on Monday increased the key policy rate by 150 basis points to 13.75 percent. Overall policy rate was raised by some 400 basis points during the last two weeks. However, the mark-up rates of EFS and LTTF have been enhanced by 2 percent. SBP has decided that with effect from May 24, 2022, mark up rate for financing under EFS and IERS will be increased from 5.5percent p.a. to 7.5percent p.a. In addition, the mark up rate for financing under LTFF and ILTFF is enhanced from 5 percent p.a. to 7 percent p.a.

Further, in future, the rates of EFS and LTFF will be linked with SBP Policy Rate through a formula so that any change in policy rate is automatically reflected in rates of these refinance schemes. SBP has said that while doing so, it will be ensured that rates on these SBP refinance facilities are maintained at such a level that they continue to provide sufficient incentive to the export sector of Pakistan. According to SBP, all other instructions on the subject shall remain unchanged.

Copyright Business Recorder, 2022