The private sector retired Rs297 billion in debt during the first quarter (July–September) of the ongoing fiscal year 2025-26, compared to Rs18.5 billion in the same period of FY25, according to data released by the State Bank of Pakistan (SBP).
The first quarter also closed without any new private sector borrowing, as businesses continued to repay loans amid sluggish economic activity and heightened uncertainty.
In contrast, FY25 had seen a sharp rebound in private credit, ending with borrowings exceeding Rs1 trillion — the highest in three years. Despite this improvement, economic growth remained modest at 2.68 percent, later revised upward by the National Accounts Committee (NAC) to 3.04 percent, a figure questioned by independent economists.
Analysts said that even after the policy rate was reduced to 11 percent, the private sector has remained hesitant to borrow, reflecting a broader climate of uncertainty driven by political instability and rising security concerns in Khyber Pakhtunkhwa and Balochistan.
Despite subdued private credit demand, commercial banks continue to post record profits, supported by heavy government borrowing. The trend is expected to persist through FY26, as the Federal Board of Revenue (FBR) struggles with revenue shortfalls.
The FBR missed its collection target for the first quarter by Rs199 billion, mainly due to lower domestic sales tax and reduced revenue from utility bills, which declined amid slower business activity, recurring power outages, and the transition to solar energy.
