KARACHI: The State Bank of Pakistan (SBP) on Monday increased markup rate on the conventional and Islamic refinancing schemes following a hike in policy rate, a circular said.
The markup for financing under export refinance scheme (EFS) has been raised to 7.5 percent per annum from 5.5 percent and mark up rate on long term financing facility (LTFF) is enhanced to 7 percent from 5 percent.
“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 in a circular.
“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,” it added.
The SBP raised the policy rate by 150 basis points to 13.75 percent. The refinancing schemes introduced by the SBP supported an increase in the bank lending for the private borrowers. The SBP said going forward, to strengthen monetary policy transmission, “these rates will be linked to the policy rate and will adjust automatically, while continuing to remain below the policy rate in order to incentivize exports”.
In nominal terms, private sector credit growth remained robust through April, reflecting strong economic activity and higher input prices which have enhanced working capital requirements of firms, the central bank said in a statement.
The private sector credit off-take jumped 22.9 percent year-on-year to Rs7.854 trillion in April on strong demand for working capital loans.
The private businesses took Rs6.757 trillion loans at the end of April, up 22.3 percent from a year earlier. Since the last MPC meeting, secondary market yields, benchmark rates and cut-off rates in the government’s auctions have risen, particularly at the short end.
Analysts said the surging borrowing costs raised the risk of falling credit growth and slowing economy. Analysts said the surging borrowing costs raised the risk of falling credit growth and slowing economy.
The MPC noted that the market rates should be aligned with the policy rate and in case of any misalignment after today’s policy decision, SBP would take appropriate action, it added.