Pakistan’s banking sector cuts Export Refinance Facility markup by 3%

Publishing date: 13 February 2026

Published in: Business Recorder

In a major move to support the country’s economic revival, Pakistan’s banking sector has yet again stepped up to voluntarily reduce markup rate on the Export Refinance Facility (ERF) by 3 percent, Pakistan Banks Association (PBA) said on Wednesday.

This collective initiative demonstrates the sector’s resolve to prioritise national interest, lowering the cost of doing business for exporters to catalyse foreign exchange earnings. Effective immediately, this reduction brings the end-user rate for exporters under the ERF scheme down to 4.50 percent for all new loans and rollovers, it added.

However, the PBA mentioned that the initiative is currently subject to the existing ERF limit of Rs 1,052 billion, though this capacity is designed to be flexible and may increase as and when the State Bank of Pakistan (SBP) or EXIM Bank increases the limit through June 2027.

This measure represents a vital public interest intervention, aimed at materially promoting economic progress by lowering financing costs for exporters and strengthening foreign exchange inflows.

Citing the latest industry data, the PBA highlighted that banks are actively deploying liquidity to support economic recovery.

In FY25, private sector credit grew by Rs 1.1 trillion, a massive increase compared to Rs 470 billion in FY24, reflecting a strong uptick in both working capital and fixed investment loans.

This growth is inclusive, with the sector achieving a 57 percent surge in the SME borrower base, and the amount extended to SMEs doubling in two years. Simultaneously, the agriculture sector saw a historic rebound, with the borrower base growing from 2.7 million to nearly 3 million, reversing a sliding trend since 2019, and disbursements reaching a record PKR 2.58 trillion.

Private Sector credit further expanded by Rs 654 billion (or 6.75%) in the first half of FY26 (Jul-Dec). This support for Priority Sector Lending persisted despite intense fiscal crowding out, as banks financed a massive Rs 1.95 trillion in government borrowing, proving that the sector remains the primary engine of economic support.

This rate relief is the latest in a series of strategic interventions by the banking industry to stabilise the national economy, including playing critical roles in reducing circular debt and facilitating the privatisation of Pakistan International Airlines (PIA).

Moving forward, the PBA vows to remain focused on value addition for the people of Pakistan. The overarching goal remains twofold: continuing to reward the small investors holding billions of shares in the sector, and expanding financial inclusion to ensure that economic benefits reach every corner of the nation.

Zafar Masud, Chairman PBA, has said that this initiative is not just about numbers; it is about the Banking Sector answering the call of the nation. ‘‘We recognise that export growth is critical for Pakistan’s economic stability. By providing capital at a highly competitive 4.50 percent, the sector is proving that it stands firmly behind the State and our exporters’’, he added.

From supporting the PIA privatisation to managing circular debt, the banking industry remains fully committed to driving Pakistan’s prosperity, he added.

The Pakistan Banks Association expresses its sincere gratitude to the State Bank of Pakistan and the federal government for their continued support and guidance in facilitating these voluntary relief measures.