The State Bank of Pakistan (SBP) tightened its monetary policy stance even more, to 15%, and increased the rates for specialized lending programs to 10% from 10%.
The mark-up rate for financing under the Export Finance Scheme (EFS) is increased from 7.5 percent per year to 10 percent per year, and the mark-up rate for financing under the Long Term Financing Facility (LTFF) is increased from 7 percent per year to 10 percent per year, according to the circular released by the SBP.
The notification states that the increased tariffs will take effect on July 8, 2022. By maintaining these rates at their existing level, which is 5% below Policy Rate, EFS and LTFF rates have now been linked to SBP Policy Rate.
Any time the Policy Rate changes, the markup rates for EFS and LTFF are automatically updated to keep the difference between those rates and the Policy Rate at 5%. However, this disparity could change depending on how the economy performs in the future.
The interest rates on EFS and LTFF loans are now being linked to the policy rate to increase monetary policy transmission, while continuing to encourage exports by currently offering a discount of 500 basis points relative to the policy rate, according to the MPC statement.
This combined action carries on the monetary tightening started in September of last year, which is intended to ensure a gentle landing for the economy amid an exceedingly difficult and unsettling global environment, it added.
Exporters and manufacturers, who are already feeling the strain of strong inflationary pressure together with the record increase in energy costs, will pay a price for higher lending rates in terms of the cost of doing business.
Exporters of a variety of goods and services could find it challenging to provide their customers and suppliers with competitive prices for their goods on the global marketplaces.