The easing of monetary policy has begun to weigh on the profitability of the State Bank of Pakistan (SBP), with the central bank reporting a profit of Rs1.99 trillion for FY26, down from Rs2.5tr in the previous fiscal year.
The benchmark interest rate, which had peaked at 22 per cent a few years ago, has been gradually reduced to 11.5pc. However, renewed inflationary pressures stemming from higher energy prices amid tensions in the Middle East could complicate the outlook for further rate cuts.
According to the SBP’s Annual Financial Statements issued on Thursday, the central bank earned a net profit of Rs1,990bn during FY26. After accounting for statutory and other required appropriations, Rs1,932bn of the surplus was transferred to the federal government.
The SBP had earned Rs2.5tr in FY25 and remitted most of the amount to the government. Over the past three years, the central bank has transferred trillions of rupees to the government, providing an important source of non-tax revenue and helping meet its financing requirements.
The sizeable SBP profits have also supported the government’s efforts to contain the fiscal deficit and compensate for shortfalls in tax collection. The government has consistently struggled to meet its annual tax revenue targets, with central bank profits helping bridge part of the gap.
The additional liquidity generated through the SBP transfers has also enabled the government to retire short-term domestic debt while increasing its reliance on longer-term borrowing. The central bank’s balance sheet shows that borrowing through Pakistan Investment Bonds (PIBs) has increased over the past three years, while reliance on short-term Market Treasury Bills has declined.
The country’s domestic debt stood at Rs59.94tr at the end of FY26, registering a 9pc increase, or around Rs4.969tr, during the year.
Meanwhile, Pakistan’s total liquid foreign exchange reserves reached $22.587bn during the week ended Aug 21, the SBP said.
The central bank’s foreign exchange reserves rose by $17 million to $17.098bn, while reserves held by commercial banks stood at $5.488bn.
