Pakistan’s banking sector has reduced the mark-up rate on export financing by 3 percent, bringing the end-user rate under the Export Refinance Facility (ERF) down to 4.50 percent with immediate effect. The move is aimed at lowering borrowing costs for exporters and strengthening foreign exchange earnings amid ongoing economic stabilization efforts.
Export Refinance Facility Rate Reduced to 4.50%
In a statement issued in Karachi, the Pakistan Banks Association (PBA) confirmed that the reduction applies to all new loans and rollovers under the Export Refinance Facility within the existing limit of Rs. 1,052 billion.
The association said the facility limit may be enhanced if the State Bank of Pakistan (SBP) or EXIM Bank expands the scheme through June 2027.
PBA Chairman Zafar Masud stated:
“Providing export finance at 4.50 percent demonstrates the banking sector’s commitment to supporting exporters and ensuring national economic stability.”
The reduction is expected to ease liquidity pressures on exporters, particularly in textile, manufacturing, and value-added sectors that rely heavily on working capital financing.
Private Sector Credit Expands
The PBA highlighted that banks have continued to support economic activity despite significant government borrowing.
In FY25, private sector credit rose by Rs. 1.1 trillion compared to Rs. 470 billion in FY24, indicating stronger demand for working capital and fixed investment.
The growth has been broad-based. The SME borrower base surged by 57 percent, while SME financing doubled over the past two years. In the agriculture sector, the borrower base increased from 2.7 million to nearly 3 million, with total disbursements reaching a record Rs. 2.58 trillion.
During the first half of FY26 alone, private sector credit expanded by Rs. 654 billion, or 6.75 percent. Over the same period, banks financed Rs. 1.95 trillion in government borrowing.
Economic Significance
The Export Refinance Facility is a key policy tool designed to provide concessional financing to exporters, enabling them to compete in global markets. With Pakistan focusing on boosting exports to stabilize its external account, the reduced mark-up rate is expected to improve cost competitiveness and enhance export growth.
The banking sector also reiterated its role in supporting broader reforms, including efforts to address circular debt and facilitate major privatization initiatives such as Pakistan International Airlines.
The 3 percent mark-up cut signals coordinated efforts between financial institutions and policymakers to stimulate export-led economic recovery.
