PBA cites surge in private sector credit, SME lending and record agriculture financing
Many foreign investors are believed to be borrowing from their domestic banks at lower interest rates (6-7%) and investing in Pakistan’s T-bills, which offer a high rate of return (20%). Photo: file
KARACHI:
The local banking sector has announced a voluntary 3% reduction in the rate of return for the export sector, bringing the markup rate under the Export Refinance Facility down to 4.5%. The move is expected to lower business costs for exporters and help boost foreign exchange earnings.
Commercial banks have implemented the relief for exporters on all new loans as well as rollover loans, with the facility remaining effective until June 2026.
According to the Pakistan Banks’ Association (PBA), private sector credit recorded a significant increase of Rs1.1 trillion in 2025, while credit disbursement to the agriculture sector reached a record Rs2.58 trillion. The PBA said the number of agricultural borrowers rose from 2.7 million to 3.0 million. PBA Chairman Zafar Masud said that during the first half of fiscal year 2026, private sector credit expanded by a further Rs654 billion, while banks also financed government borrowing amounting to a substantial Rs1.95 trillion.
The number of small and medium enterprises (SMEs) availing financing from the banking sector increased by 57%, resulting in a doubling of lending to SMEs over the past two years.
The PBA said the measure currently falls within the existing Export Refinance Scheme limit of Rs1,052 billion. However, it added that there is flexibility to enhance the limit if the State Bank or the Exim Bank approves an increase by June 2027.The association termed the move an important step in the public interest, aimed at reducing financing costs for exporters, accelerating economic growth and strengthening foreign exchange reserves. The interest rate relief, it said, is part of a series of strategic initiatives by the banking industry to stabilise the national economy, including efforts to reduce circular debt and playing a key role in the privatisation of PIA.
Masud said the step was not merely about numbers but reflected the banking sector’s commitment to responding to the nation’s call. He said exports were critical for Pakistan’s economic stability, adding that by providing financing at a highly competitive rate of 4.5%, the banking sector was demonstrating that it stood firmly with the state and its exporters. He added that the figures spoke for themselves.
