SBP raises markup rates on EFS, LTFF

KARACHI: The State Bank of Pakistan (SBP) on Thursday increased markup rates on refinancing schemes following a hike in the policy rate, a circular said.

The markup rate for financing under the export refinance scheme (EFS) increased by 2.5 percent to 10 percent, while the rate on long term financing facility (LTFF) also enhanced to 10 percent from 3 percent. The new rates will be effective from July 8.

“The rates of EFS and LTFF have now been linked with SBP policy rate by keeping these rates currently 5 percent below policy rate,” the SBP said.

“Accordingly, with any change in the policy rate, markup rates for EFS and LTFF will be revised automatically. However, this gap is subject to revisions in view of future economic activity.”

The SBP raised the policy rate by 125 basis points to 15 percent.

“In addition, as foreshadowed in the last monetary policy statement, the interest rates on EFS and LTFF loans are now being linked to the policy rate to strengthen monetary policy transmission, while continuing to incentivize exports by presently offering a discount of 500 basis points relative to the policy rate,” the SBP said.

“In nominal terms, private sector credit grew by a further 2 percent month-on-month in May, driven by favorable developments in sectors like power, edible oil, construction-allied industries, as well as wholesale and retail trade.” The central bank said demand for fixed investment and consumer loans also picked up, reflecting robust economic activity.