Private sector credit hits Rs589 billion in FY26, 57% lower than last year

According to State Bank of Pakistan (SBP) data, banks extended Rs588.68 billion in private sector credit between July 1, 2025, and January 16, 2026, compared with Rs1.37 trillion during the corresponding period last year, marking a year-on-year decline of about 57%. The slowdown highlights continued caution among businesses in taking on new debt, even as the government’s move to ease liquidity conditions and support exports.

To support industrial activity and exports, the federal government recently reduced the export refinance rate by 300 basis points to 4.5%, aiming to ease financing costs for exporters and allied sectors. 

Separately, the SBP kept the policy rate unchanged at 10.5% but lowered the Cash Reserve Requirement (CRR) for banks from 6% to 5%, a move intended to inject liquidity into the banking system and encourage credit expansion. 

Bankers and analysts say these measures could help revive private sector lending, particularly to large-scale manufacturing, in the second half of the fiscal year.  They noted that a one-percentage-point reduction in the CRR could release around Rs300 billion into the banking system. 

Industry representatives welcomed the incentives but cautioned that structural challenges remain. Pakistan Hosiery Manufacturers and Exporters Association said the reduction in export financing costs was a positive step but stressed that high energy prices and taxes continue to undermine competitiveness.

The association urged the government to further rationalise electricity tariffs and tax rates to enable exporters to compete with regional peers and achieve sustainable export growth.