Banks stepping in where state has stepped back

EDITORIAL: The banking sector’s voluntary decision to cut the markup on the Export Refinance Facility to 4.5 percent is a notable intervention, precisely because it was not compelled by regulation. At a time when banks are already absorbing massive government borrowing and operating under tight liquidity conditions, choosing to lower financing costs for exporters sends a signal of intent. It recognises that export recovery is central to economic stability. But it also exposes an uncomfortable truth: banks are once again compensating for a policy vacuum that properly belongs to the state.

Exports do not grow because credit is marginally cheaper. They grow when policy coherence, cost competitiveness and market access align. Financing plays a role, but it comes late in the chain, at the execution stage, once firms already have orders, inputs and predictable operating conditions. When banks are left to shoulder the visible burden of export support, it reflects how hollow the state’s export policy matrix has become.

That hollowness has been many, many years in the making. Exporters continue to operate under volatile energy pricing, fragmented tax administration, delayed refunds and shifting regulatory signals. Each budget promises export-led growth, yet the surrounding policy environment consistently undermines it. In that context, a voluntary rate cut under a capped refinance window can only go so far. It helps firms that are already banked, compliant and eligible. It does little for the broader export base that struggles with costs, uncertainty and weak incentives.

The imbalance is stark. Banks are deploying liquidity into the economy even as fiscal crowding out intensifies. Government borrowing absorbs vast sums, constraining the space for private credit. That the banking sector is still able to offer targeted relief under these conditions deserves acknowledgement. It reflects institutional resilience and a degree of alignment with national priorities. But resilience should not be mistaken for substitution. Export strategy cannot be outsourced to lenders.

This matters because export growth is no longer one policy objective among many. It is the make-or-break variable for a fragile economy facing chronic balance-of-payments stress. Without sustained export expansion, currency pressure returns, growth stalls and stabilisation cycles repeat. The state’s responsibility, therefore, is not merely to applaud financial relief measures, but to rebuild the policy scaffolding that allows such measures to work.

At present, that scaffolding is uneven. Incentives remain narrow and episodic. Industrial policy lacks direction. Trade facilitation reforms move slowly. The result is an export sector that relies excessively on a few products and markets, while struggling to move up the value chain. In this setting, cheaper credit risks becoming a palliative rather than a catalyst.

There is also a question of scale. The ERF operates within a defined limit. It cannot substitute for economy-wide competitiveness. Export momentum requires predictable taxation, reliable energy supply, logistics efficiency and regulatory stability. These are state functions. When they falter, no amount of financial engineering can compensate for the structural drag.

None of this diminishes the value of the banks’ decision, of course. Voluntary action matters, especially when it reduces costs for exporters and signals confidence in recovery. It also highlights that parts of the economic system remain functional and responsive. But appreciation must be paired with clarity. Banks are intervening at the margins of a system whose core levers remain under state control.

The deeper concern is what this pattern implies. Each time banks, or any other sector, step forward to plug a gap left by policy inertia, it normalises the absence of strategy. Export growth becomes dependent on ad hoc relief rather than durable reform. Over time, this weakens accountability, as outcomes are judged by short-term support rather than long-term performance.

If export revival is truly the priority it is claimed to be, the state must reclaim its role. That means aligning energy, tax, and trade policies with export objectives, reducing uncertainty, and creating incentives that reward scale, diversification, and value addition. Only then can financial support translate into sustained gains. The banking sector has played its part. It should not be asked to play the state’s role as well.

Copyright Business Recorder, 2026