Regulatory Alerts2025-04-07 | EPD Circular Letter No. 01Replacement of Term “LIBOR” with “Relevant Benchmark Rate”
The Exchange Policy Department has replaced the term “LIBOR” with “Relevant Benchmark Rate” in paragraph 9(v)(a) of Chapter 19 of the Foreign Exchange Manual to address the permanent discontinuation of LIBOR-based reference rates. This amendment modifies the cost of borrowing framework for Foreign Currency loans extended to Micro Finance Banks and Institutions under the Financial Sector Borrowing from Abroad category. Authorized Dealers must notify their constituents to ensure compliance, particularly by submitting local interest rate quotes whenever international borrowing costs exceed the Relevant Benchmark Rate plus five percent.
Circulars/Notifications -
Exchange Policy Department
EPD Circular Letter No. 01 of 2025
April 07, 2025
The Presidents/Chief Executives All Authorized Dealers in Foreign Exchange Dear Sir / Madam,
Replacement of Term “LIBOR” with “Relevant Benchmark Rate”
Attention of Authorized Dealers (ADs) is invited towards para 9(v)(a) of Chapter 19 of the Foreign Exchange Manual (FEM), in terms of which “Cost of Borrowing” has been specified for Foreign Currency (FCY) loans under the category of “Financial Sector Borrowing from Abroad (FSBA) by Micro Finance Banks/Institutions in Pakistan”. 2. In this regard, due to permanent discontinuation of all LIBOR-based reference rates in the international financial markets, the term “LIBOR”
as specified in Para 9(v)(a) of Chapter 19 of the FEM is no longer relevant. Accordingly, it has been decided to replace the term “LIBOR” with “Relevant Benchmark Rate” in Para 9(v)(a) of Chapter 19 of the FEM and the amended Para is reproduced as under:
“ The cost of borrowing will be negotiable which shall be competitive with the prevailing rate in local market. Micro Finance Banks/Institutions shall submit the local quotes of interest rate from local lending institutions, if cost of borrowing from international institutions is higher than “Relevant Benchmark Rate” + 5%.”
- ADs are advised to bring the above changes to the notice of all their constituents for information and meticulous compliance.
Yours truly,
(Dr. Asif Ali)
Director