Private sector borrowing in Pakistan has turned positive for the first time in fiscal year 2026-27, with State Bank of Pakistan (SBP, the central bank) data on Monday showing net borrowing of Rs87 billion from 1 July to 23 October. In the same period of the previous fiscal year, the private sector had retired Rs29 billion of bank debt.
Officials link the change to sustained government pressure on banks to channel more liquidity into private businesses. Even so, lenders have still not supplied enough credit to lift growth above the pace of the past four years, according to the same account of the figures.
How the Rs87 billion shift broke down
SBP numbers show a sharp contrast with last year. Conventional banks recorded only Rs320 million of debt retirement in the July–23 October window, compared with Rs117 billion retired in the matching stretch of the prior fiscal year. Islamic banks posted a net debt retirement of Rs63 billion, up from Rs25 billion a year earlier.
Only Islamic branches of conventional banks extended fresh loans in this period, rather than taking repayments. The wider picture still leaves private sector borrowing in Pakistan far from a broad credit boom: much of the system remains cautious, and Islamic banks as a group continued to see net retirements.
Why banks and firms remain cautious
Banks see elevated risk in lending to firms, while many businesses are still reluctant to take new loans. Three reasons are commonly cited: high borrowing costs; political uncertainty, including terrorism in two provinces; and the threat of a wider regional conflict.
Those cost pressures tightened further last week when the SBP raised its policy interest rate by 50 basis points to 12 per cent, making new credit more expensive. Bankers and analysts expect additional increases in the coming months because the four-month average inflation rate remains in double digits.
Pressure on farm, SME and housing loans
The prime minister again told the Ministry of Finance to move against banks that delay disbursements to farmers, small and medium-sized enterprises (SMEs), and applicants under the Prime Minister’s Apna Ghar housing scheme. The message underscores Islamabad’s push for faster private-sector credit even as the policy rate has moved higher.
Whether that political pressure, combined with the early FY27 swing into net borrowing, is enough to revive investment will depend on rates, security conditions and bank willingness to lend. For now, the data mark a clear break from last year’s debt-retirement pattern without yet signalling a full recovery in private credit appetite.
Aasan alfaaz mein
Is saal pehli dafa private sector ne banks se net qarza liya hai. July se 23 October tak yeh raqam 87 arab rupay thi, jabke pichhle saal isi doran log qarz utaar rahe the. Interest rate ab 12 percent hai, is liye naya karza mehnga pad sakta hai. Farmers, chhote kaarobar aur Apna Ghar applicants ko loans mein deri ka masla sarkar ne phir uthaya hai.
