Pakistan’s banking sector announced a voluntary 3% reduction in the markup rate on the Export Refinance Facility (ERF) on Wednesday, bringing the end-user cost for exporters down to 4.50% with immediate effect. The Pakistan Banks Association (PBA), the representative body of the country’s banking sector, described the move as a strategic intervention in the national interest to ease financing costs for exporters and promote foreign exchange inflows amid ongoing economic recovery efforts.
The rate reduction under the ERF scheme applies immediately to all new loans and rollovers, allowing exporters to access capital at a more competitive cost. The initiative is currently aligned with the existing ERF limit of Rs1,052 billion, though this ceiling is designed to remain flexible. The limit may be expanded through June 2027 if the State Bank of Pakistan (SBP) or EXIM Bank approves an increase, ensuring sustained support for the export sector.
PBA emphasized that this measure represents a vital step to support economic progress by lowering financing costs for exporters, thereby incentivizing growth in foreign exchange inflows. According to the association, the banking sector has been actively deploying liquidity to support the broader economic recovery, reflecting a commitment to the public interest beyond routine banking operations.
Industry data cited by PBA highlights that private sector credit grew by Rs1.1 trillion in FY25, a significant rise compared to Rs470 billion in FY24. This growth has been broad-based, encompassing working capital loans, fixed investment loans, and an inclusive expansion of the SME borrower base, which increased by 57%, while credit extended to SMEs doubled over the last two years.
The agriculture sector also recorded a historic rebound, with the borrower base growing from 2.7 million to nearly 3 million, reversing a downward trend since 2019. Total agricultural disbursements reached a record Rs2.58 trillion, signaling a renewed focus on critical economic sectors. Private sector credit further expanded by Rs654 billion, or 6.75%, during the first half of FY26 (July–December), reflecting sustained momentum in lending activity.
PBA stated that the ERF rate relief is part of a series of strategic interventions by the banking industry to stabilize the economy. This includes initiatives such as reducing circular debt and facilitating the privatization of Pakistan International Airlines (PIA), illustrating the sector’s broader role in national economic management.
Zafar Masud, Chairman of PBA, noted that the measure is not solely about financial figures but about the banking sector responding to the nation’s call. By lowering the cost of capital for exporters to 4.50%, banks are reinforcing their support for Pakistan’s economic stability and export growth. The sector’s efforts in SME financing, agricultural lending, and strategic interventions continue to play a pivotal role in sustaining economic momentum and ensuring operational resilience across critical industries.
The voluntary ERF markup reduction demonstrates the banking sector’s proactive stance in supporting national priorities, facilitating growth in exports, and bolstering foreign exchange reserves while maintaining a strong focus on inclusive credit expansion and sectoral development.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.