PBA cites increased private sector credit, SME lending and record agricultural financing
Many foreign investors would borrow from their domestic banks at lower interest rates (6-7%) and invest in Pakistani treasury bills, which offer a high rate of return (20%). Photo: file
KARACHI:
The local banking sector announced a voluntary 3% reduction in the export sector’s rate of return, bringing the mark-up rate under the Export Refinancing Facility to 4.5%. The move is expected to reduce trade costs for exporters and help increase foreign exchange earnings.
Commercial banks have implemented relief for exporters on all new loans as well as on rolled-over loans, with the mechanism remaining in effect until June 2026.
According to the Pakistan Banks Association (PBA), credit to the private sector recorded a significant increase of Rs 1.1 trillion in 2025, while credit disbursements to the agricultural sector reached a record high of Rs 2.58 trillion. The PBA said the number of agricultural borrowers increased from 2.7 million to 3.0 million. PBA Chairman Zafar Masud said that during the first half of FY2026, credit to the private sector increased by another Rs654 billion, while banks also financed government borrowings to the tune of a substantial Rs1.95 trillion.
The number of small and medium-sized enterprises (SMEs) receiving financing from the banking sector increased by 57%, leading to a doubling of SME lending over the past two years.
The PBA said the measure currently falls within the current export refinancing program limit of Rs1,052 billion. However, it added that it was possible to increase the limit if the State Bank or Exim Bank approved an increase by June 2027. The association called the move an important measure in the public interest, aimed at reducing financing costs for exporters, accelerating economic growth and strengthening foreign exchange reserves. The interest rate relief, according to the statement, is part of a series of strategic initiatives by the banking sector aimed at stabilizing the national economy, including efforts to reduce circular debt and play a key role in the privatization of PIA.
Masud said the move was not just about numbers but reflected the banking sector’s commitment to answering the nation’s call. He said exports were essential to Pakistan’s economic stability, adding that by providing financing at a very competitive rate of 4.5 per cent, the banking sector was demonstrating that it stood firmly with the state and its exporters. He added that the numbers speak for themselves.
