Private-sector businesses retired Rs393.4 billion in net bank debt during the first six weeks of the current fiscal year, signalling weak investment activity as the government seeks to push economic growth beyond its 4 per cent target for 2026-27.
According to data released by the State Bank of Pakistan (SBP) on Monday, the private sector retired Rs393.4bn between July 1 and Aug 15, compared with Rs232bn during the same period last year.
The increase in debt retirement points to subdued demand for bank financing and weak private-sector investment despite efforts by the government to encourage businesses to play a greater role in economic expansion.
Bank advances to the private sector had increased to Rs1.46 trillion in FY26 from Rs1tr in FY25. However, the rise in lending did not translate into stronger economic growth, with the economy expanding by only 3.7 per cent during FY26.
The SBP data also showed that lending to non-bank financial institutions (NBFIs) remained negative during the 45-day period, with the sector recording a net debt retirement of Rs25.3bn.
SBP Governor Jameel Ahmad has previously warned that economic stabilisation alone would not be enough to place Pakistan on a path of high and sustainable growth.
He has urged banks to reconsider their business models and increase financing to the private sector, stressing that the banking industry has an important role in supporting the country’s next phase of economic growth.
Despite efforts by the government and the central bank to increase private-sector borrowing, banks have remained cautious about extending loans and have instead preferred investing surplus liquidity in relatively risk-free government securities.
High interest rates have also emerged as a major hurdle for businesses, increasing production costs and making Pakistani products less competitive in regional markets.
An industrialist attributed weak private-sector participation to several factors, including political uncertainty, tensions in the Gulf region, elevated oil prices and law-and-order concerns.
He also cited disruptions caused by goods transporters and political opposition to the petroleum levy, saying a broad range of policy and structural reforms was needed to restore business confidence.
