Private sector retires Rs393 billion in first 45 days as bank lending remains weak

Private sector borrowers repaid a net Rs393.4 billion of bank debt over the 45 days from July 1 to August 15, Profit reported, citing State Bank of Pakistan data. That compares with a net repayment of Rs232 billion in the same period last year, pointing to weaker demand for credit. High interest rates and uncertainty about the economy are keeping firms wary of taking on new debt.

Private sector bank credit grew to Rs1.46 trillion during FY26, compared with roughly Rs1 trillion a year earlier. Even so, GDP growth stayed at 3.7% that year, so the larger loan book did not translate into faster activity. Financing to non-bank financial institutions also weakened, with a net retirement of Rs25.3 billion over the same 45 days. The central bank has repeatedly urged lenders to finance businesses, but banks keep favouring government securities, which carry relatively low risk.

Elevated borrowing costs also make financing dearer and push up the price of goods made at home relative to regional competitors. With the government aiming for GDP growth above 4% in FY27, weak private credit demand complicates the push toward private-sector-led expansion.