ISLAMABAD: The State Bank of Pakistan (SBP) is set to frame strict rules to prevent misuse of recently approved subsidy schemes, taking into account past experiences, sources in the Commerce Ministry told Business Recorder.
Sharing details, sources said that during a pre-budget meeting, the Prime Minister directed the Finance Division to undertake a comprehensive review of all past and existing export subsidy and incentive schemes. The Division was asked to present a proposal for a transparent, performance-linked, and fiscally sustainable export facilitation framework.
In a subsequent budget meeting held on May 20, 2026, it was further directed that the SBP and the Ministry of Finance finalise an export finance scheme to ensure that credit facilities are available to exporters at competitive rates, capped at 600 basis points.
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The Ministry of Finance was also tasked with ensuring the required budgetary allocation for the differential subsidy in the FY2026-27 budget. Accordingly, a task force was generated on the Prime Minister’s Delivery Unit (PMDU).
For this purpose, the Finance Division has earmarked Rs88 billion as subsidy for export finance schemes in FY2027, of which Rs5 billion will be allocated for the ongoing Long-Term Financing Facility (LTFF) in the current fiscal year.
The Finance Division informed the Economic Coordination Committee (ECC) that, in compliance with the Prime Minister’s directives, the SBP has proposed three financing schemes to boost exports: (i) enhancement of the EXIM-administered Export Finance Scheme (E-EFS); (ii) launch of a new Long-Term Export Growth Financing Facility (LTEGFF); and (iii) introduction of a performance-based rebate on incremental exports.
The E-EFS is a short-term financing facility designed to meet the working capital requirements of exporters of value-added goods, with loan tenures of up to 180 days. However, the existing portfolio size of Rs1,000 billion is considered insufficient to meet demand, leaving many exporters unable to access financing due to limited bank allocations.
EXIM Bank is also pursuing improved targeting of the scheme, whereby financing for traditional products and markets will gradually be reduced to 50 percent by 2030 from the current 70 percent. To support this transition, it has been proposed to enhance the E-EFS portfolio to Rs1,500 billion, enabling more exporters, including SMEs, to access affordable working capital. The terms for consumers under the enhanced limit will remain largely unchanged.
The proposed LTEGFF will replace the existing EXIM-administered Long-Term Financing Facility (E-LTFF) and is aimed at supporting new export-oriented projects as well as Balancing, Modernisation and Replacement (BMR) of existing units. With a proposed size of Rs350 billion, the facility will target enterprises with at least 80 percent export orientation and compliance with environmental standards aligned with Pakistan’s Green Taxonomy.
Unlike the existing E-LTFF, which carries variable interest rates and has seen limited uptake due to associated risks, the LTEGFF will offer subsidised fixed interest rates for up to 10 years. This is expected to attract significant investment, boost exports, generate employment, and contribute to Pakistan’s climate commitments and Nationally Determined Contributions (NDCs).
According to estimates, the total subsidy requirement for LTEGFF will be Rs195.98 billion, with Rs25.16 billion allocated for FY2027.
The government also plans to introduce a performance-based rebate scheme on incremental exports from July 1, 2026, with an estimated annual cost of Rs15 billion for FY2026-27, of which Rs10 billion is expected to be utilised in the current fiscal year.
Under the proposed structure: (i) exporters achieving up to 10 percent growth over the previous year will receive a rebate equivalent to 1 percent of incremental exports; and (ii) exporters exceeding 10 percent growth will qualify for a higher rebate (details to be finalised).
To ensure timely disbursement, exporters exceeding their average quarterly exports of the previous year will receive 75 percent of the applicable rebate on a provisional basis. At year-end, full adjustments will be made: exporters exceeding annual benchmarks will receive remaining payments, while those falling short will be required to refund provisional rebates within 15 days of the year’s close.
During discussions, the ECC appreciated the overall design of the scheme but deliberated extensively on its fiscal impact, expected returns, and risks of misuse. Participants emphasised the need to prioritise SMEs—particularly under the revised SME definition—introduce per-party limits, and promote market and product diversification.
The forum agreed that appropriate safeguards and “guardrails” must be put in place to ensure that the schemes deliver intended benefits without misuse.
After detailed deliberations, the ECC approved the proposals, directing the SBP, in its role as regulator, to ensure strict oversight and prevent misuse of the facilities in light of past experience.
Copyright Business Recorder, 2026
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