KARACHI: The State Bank of Pakistan (SBP) on Monday enhanced rates for financing schemes sharply by 200 basis points following massive increase in key policy rate.
The SBP increased the mark up rate for financing under Export Finance Scheme (EFS) from 5.5 per cent per annum to 7.5 per cent per annum. Similarly, mark up rate for financing under Long Term Financing Facility (LTFF) has been enhanced from 5 per cent to 7 per cent per annum.
The increase in interest rates is applicable from May 24, 2022.
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, the SBP said.
While doing so, it will be ensured that rates on these SBP refinance facilities are maintained at such level that they continue to provide sufficient incentive to export sector of Pakistan.
Earlier, the SBP on Monday increased the key policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.
While increase the key policy rate, the SBP said since the last Monetary Policy Committee (MPC) meeting, provisional estimates suggest that growth in FY22 has been much stronger than expected.
Meanwhile, external pressures remain elevated and the inflation outlook has deteriorated due to both home-grown and international factors. Domestically, an expansionary fiscal stance this year, exacerbated by the recent energy subsidy package, has fueled demand and lingering policy uncertainty has compounded pressures on the exchange rate.
Globally, inflation has intensified due to the Russia-Ukraine conflict and renewed supply disruptions caused by the new Covid wave in China. As a result, almost all central banks across the world are suddenly confronting multi-year high inflation and a challenging outlook.