LAHORE, Oct 24: The State Bank Governor Dr Ishrat Hussain has said the rate of export refinance will be cut down to 10 per cent from the existing 12 per cent by December to boost exports from Pakistan and to help exporters who have obtained duty free access to the EU markets from January 2002.

In his lecture at the Government College, Lahore, here on Wednesday, the governor said Pakistan’s economy had been hit hard after the September 11 events as it became the frontline state in the global war against terrorism. However, he was hopeful that the economy would start recovering in the third quarter of the current financial year.

The businessmen have been demanding reduction in the refinance rate after the terror attacks on the US soil to help boost the plummeting exports.

The governor said the protest demonstrations against the US and burning of its flags was sending wrong signals to the buyers and consumers in the American market leading to cancellation of huge export orders. He said the oil and gas exploration companies had already packed up and no one was aware when would they return. He said the image of the country was being tainted by irresponsible behaviour of a small section of people.

He called for making Pakistan self-reliant, saying the economy was facing five major challenges: huge debt burden, high level of poverty, fiscal deficit, unemployment and lower tax revenue. He said the GDP rate had been reduced to 2.5 per cent from five per cent while foreign investment into the country had drastically dwindled.

To overcome its economic problems arising from extremely high debt, he said, Pakistan was seeking soft loans and a moratorium on the existing foreign debt for 20 to 30 years. He was hopeful that the country would be able to get $800 million worth of assistance in the shape of grants and secure concessions in the multilateral loans of $16 billion. He said it would provide a relief of $400-500 million of annual servicing to the country.