Private sector borrowing remained subdued during the first two-and-a-half months of the current fiscal year, with businesses continuing to repay bank debt rather than taking on fresh credit.
According to the latest State Bank of Pakistan (SBP) data, private-sector debt repayments reached Rs364.5 billion between July 1 and September 11, more than double the Rs170 billion recorded during the same period last year.
A similar trend was observed during the first quarter of the previous fiscal year. However, private-sector borrowing gained momentum later, with total borrowing reaching Rs1.4 trillion in FY26 compared with Rs1 trillion in the preceding fiscal year.
Despite the increase in overall borrowing last year, there were limited signs of sustained investment in trade and industry. Pakistan’s economy grew by 3.7 per cent in FY26, while the Asian Development Bank has projected the same growth rate for FY27, suggesting that economic expansion is likely to remain modest.
Private-sector participation has remained weak over the past three years, with economic growth staying below 4pc during the period. Investors have cited several factors behind the limited appetite for new investment, with high interest rates among the major constraints.
The government has introduced the Apna Ghar scheme as part of efforts to stimulate economic activity. The prime minister has also urged banks to increase lending to the construction sector, which supports more than 40 allied industries.
SBP data showed that conventional banks accounted for Rs194bn in debt repayments between July 1 and September 11, compared with Rs76.4bn during the corresponding period last year.
Islamic banks recorded debt repayments of Rs165bn, up from Rs139bn a year earlier. Meanwhile, Islamic banking branches of conventional banks reported debt retirement of Rs5.5bn, compared with net borrowing of Rs45bn during the same period last year.
Private-sector credit offtake in FY26 was higher overall than in the preceding year, although lending patterns varied across banking segments. Conventional banks provided Rs290.7bn in credit in FY26, compared with Rs405bn previously, while Islamic banks extended Rs339bn against Rs518bn.
Islamic banking branches of conventional banks, however, recorded a substantial increase in lending, extending Rs833bn in FY26 comp
