Govt slashes mark-up rate on development loans to 11.89% for FY26

The federal government has sharply cut the mark-up rate on development loans and advances for fiscal year 2025-26 to 11.89%, down from 17.74% a year earlier, according to a notification issued by the Ministry of Finance. 

The finance ministry said the final mark-up rate chargeable on cash development loans to provincial governments, loans to local bodies, financial and non-financial institutions, other corporations, as well as capital outlays of the federal government in commercial departments, has been fixed at 11.89% per annum for FY2025-26.

The new rate is 5.85 percentage points lower than the 17.74% charged in FY2024-25, and also significantly below the 17.84% applied in FY2023-24.

The revised rate will apply to three main categories: cash development loans to provincial governments; loans extended to local bodies, financial and non-financial institutions, and other corporations; and capital outlays of the federal government in commercial departments.

The ministry also said the same 11.89% annual mark-up rate will apply to government advances for the purchase of conveyance and house building during FY2025-26.

The decision was conveyed through an official communication addressed to the Controller General of Accounts (CGA), Islamabad.

The lower mark-up rate is expected to ease the debt-servicing burden on provincial governments and public sector organisations that depend on federal development financing, while also reducing the financing cost for government employees availing house-building and vehicle purchase advances.