PBA cites increase in private sector credit, SME loans and record agricultural financing
Many foreign investors are believed to be borrowing from their domestic banks at lower interest rates (6-7%) and investing in Pakistan treasury bills, which offer a high rate of return (20%). Photo: archive
KARACHI:
The local banking sector has announced a voluntary reduction of 3% in the rate of return of the export sector, bringing the margin rate under the Export Refinancing Facility to 4.5%. The move is expected to reduce trade costs for exporters and help boost foreign exchange earnings.
Commercial banks have implemented the relief for exporters on all new loans as well as renewal loans, and the facility will remain in place 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 disbursement 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 fiscal year 2026, private sector credit expanded by another Rp654 billion, while banks also funded government loans of a substantial amount of Rp1.95 trillion.
The number of small and medium-sized enterprises (SMEs) receiving financing from the banking sector increased by 57%, resulting in a doubling of loans to SMEs in the last two years.
The PBA said the measure is currently within the existing Export Refinancing Scheme limit of Rp1,052 billion. However, it added that there is flexibility to increase the limit if the State Bank or Exim Bank approves an increase before June 2027. The association called the measure 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, he said, is part of a series of strategic initiatives by the banking industry to stabilize 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 simply about numbers but reflected the banking sector’s commitment to answering the nation’s call. He said exports were critical to 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 behind the State and its exporters. He added that the numbers speak for themselves.
