Private sector credit rises 14.8% to Rs11.38 trillion as bank lending recovers

Credit to Pakistan’s private sector increased 14.8% year-on-year to Rs11.38 trillion at the end of June 2026, reflecting a recovery in economic activity and banks’ willingness to lend, State Bank of Pakistan data showed. 

Outstanding private sector credit had risen from Rs8.77 trillion in June 2024 to Rs9.92 trillion in June 2025, an increase of 13%, before accelerating further over the latest fiscal year.

Bank lending to private sector businesses reached Rs9.6 trillion at the end of June, compared with Rs8.4 trillion a year earlier.

Consumer financing increased 25.4% year-on-year to Rs1.145 trillion, while auto loans rose 38% to Rs381.68 billion.

Market analysts said credit growth had strengthened sharply after remaining nearly stagnant in FY2023, when fresh private sector lending amounted to Rs46 billion. Credit flows subsequently increased to Rs513 billion in FY2024 and Rs1.081 trillion in FY2025.

The recovery coincided with the State Bank of Pakistan’s monetary easing cycle, which brought the policy rate down from 22% to between 11% and 11.5% from mid-2024 to mid-2025.

Lower borrowing costs reduced working capital expenses and encouraged banks to shift more funds towards businesses after heavy government borrowing had restricted private lending during the preceding two years.

The increase was spread across several major industries. Manufacturing loans rose to Rs6.01 trillion in June 2026 from Rs4.84 trillion in June 2024.

Credit to wholesale and retail trade increased to Rs885 billion from Rs540 billion, while lending to the telecommunications sector grew to Rs549 billion from Rs386 billion.

However, analysts said the increase remained concentrated in short-term working capital rather than long-term investment and business expansion.

Pakistan’s investment-to-GDP ratio remained between 13% and 13.6%, among the lowest in the region, indicating that stronger lending had yet to translate into a broad capital expenditure-led recovery.

Construction sector credit increased to Rs236 billion in June 2026 from Rs193 billion two years earlier, while lending to cement manufacturers rose more modestly to Rs245 billion from Rs232 billion.

The slower increase in construction and cement lending suggests that the recovery remains more closely linked to trade and consumption than construction-led investment.