SBP raises mark-up rate for export financing scheme

KARACHI: The State Bank of Pakistan (SBP) on Thursday increased mark-up rate for refinancing under Export Financing Scheme (EFS).

The SBP increased the rate of mark-up for export financing scheme following sharp jump in key policy rate by 250 basis points to 12.25 per cent.

“It has been decided to increase the markup rate for financing under Export Finance Scheme (EFS) by 2.5 per cent in line with the increase in policy rate announced in the MPC meeting today (April 07, 2022),” the SBP said.

Accordingly, the markup for Export Finance Scheme (both Part I and Part II) will be 5.5 per cent per annum with effect from April 08, 2022 till further instructions.

Banks’ spread for corporate borrowers and SME borrowers will remain unchanged i.e. 1 per cent & 2 per cent, respectively.

This revision in rates will not be applicable on financing under Rupee-based discounting facility of EFS, the SBP added.

Earlier in the day, the Monetary Policy Committee (MPC) of the SBP in its emergent meeting decided to raise the key policy rate to 12.25 per cent from 9.75 per cent.

The MPC noted that the latest developments necessitated a strong and proactive policy response. “Accordingly, the MPC decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.”

This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory.

The MPC was of the view that this action would help to safeguard external and price stability.

The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements.

These items are mostly finished goods including luxury items and exclude raw materials.