Private sector credit offtake remains weak

Private sector credit offtake stayed weak through the opening months of FY27, according to Dawn, which cited fresh State Bank of Pakistan data. Over the period from July 1 to Sept 11, private sector debt retirement reached Rs364.5 billion, more than double the Rs170 billion recorded a year earlier. A similar pattern marked the first quarter of FY26, but total private sector borrowing rose to Rs1.4 trillion by year end, up from Rs1 trillion the year before.

Despite the stronger borrowing in FY26, little money flowed into long-term projects in trade and industry, and the economy grew 3.7 per cent. On Wednesday the Asian Development Bank forecast the same rate of expansion for FY27, a modest improvement given three years of subdued private participation that kept growth under 4 per cent. Investors pointed to high interest rates as the most significant barrier to fresh investment.

To stimulate activity, the government launched the Apna Ghar scheme, and the prime minister urged banks to take a more active part in reviving construction, an industry supporting over 40 allied sectors. Land prices have risen since the Gulf war, as money once bound for Dubai property has moved to the domestic market. Lending by conventional banks reached Rs290.7 billion in FY26 against Rs405 billion, Islamic banks lent Rs339 billion versus Rs518 billion, and Islamic branches of conventional banks extended Rs833 billion compared with Rs158 billion.