LAHORE, Nov 23: Exporters are getting edgy over delay in the announcement of a cut in the cost of export refinance in line with 1.5 per cent reduction in the discount rate by the central bank.

“The State Bank should immediately announce a suitable cut in the export refinance rate following the reduction in the discount rate. It is necessary to bring down the cost of refinance if we wish to stay and compete in the international market and maintain and increase our market share,” Lahore Chamber of Commerce & Industry president Yawar Irfan Khan says.

At present, export refinance is available at 6.5 per cent. The banks charge an spread of 1.5 per cent from the borrowers, raising the actual cost of the facility to eight per cent.

“We believe that now the refinance rate must come down to six per cent so that the country’s exports could move up,” Pakistan Readymade Garments Manufacturers & Exporters Association chairman Pervez Hanif said while talking to Dawn on Saturday.

In a major move, the State Bank of Pakistan announced to cut the discount rate to 7.5 per cent a few days ago to ease monetary policy.

The discount rate, the rate at which banks can borrow funds from the central bank, is considered an effective tool of monetary and credit control. The reduction in the discount rate is taken by the commercial banks as a signal from the central bank to slash their interest rates accordingly and provide cheaper credit to the private sector.

The central bank has for five times reduced discount rate since July 2001 from 14 per cent to 7.5 per cent in a bid to encourage the private sector credit which remained abysmally low at Rs30 billion during the fiscal 2001-02 against the target of Rs98 billion for the year.

Though the central bank last reduced its discount rate to nine per cent from 10 per cent in January, the cost of export refinance was not lowered.

The banks have brought down their average weighted lending rates to 11 per cent in response to the central bank’s easy monetary policies, the businessmen still consider the bank credit to be quite expensive. The federal finance ministry and the central bank have time and again reiterated their desire for bringing down the weighted lending rate to single digit, the massive infected portfolio is said to be holding the banks from further downward adjustment of their interest rate regime.

“The lending rates have come down, especially for the major business houses. However, there still exists vast room for further cut,” said Pervez Hanif.

Yawar Irfan said it was impossible for exporters to compete in the world market with such high credit cost. “The credit cost coupled with expensive electricity and other inputs makes our prices quite unattractive in the foreign markets, hampering our exports,” he added.

Meanwhile, the State Bank is reported to be in a fix over cut in export refinance cost, pegged with T bill rates, next month.