Private Sector Shifts to Net Borrowing for First Time in FY27

KARACHI: In a significant shift, the private sector has transitioned from debt retirement to net borrowing from banks for the first time in the fiscal year 2026-27. This change, recorded between July 1 and October 23, 2026, marks a pivotal moment in the financial landscape of Pakistan.

According to data released by the State Bank of Pakistan (SBP) on Monday, private-sector net borrowing reached Rs87 billion during this period, contrasting sharply with the Rs29 billion in debt retirement seen in the same timeframe last fiscal year. The government’s ongoing efforts to encourage banks to increase liquidity in the private sector appear to be driving this trend. Prime Minister reiterated the need for the Ministry of Finance to address delays in loan disbursements to crucial sectors, including agriculture and small and medium-sized enterprises (SMEs).

Despite this increase in borrowing, banks have yet to provide sufficient liquidity to stimulate the private sector adequately, which is essential for boosting the growth rate beyond the stagnation observed over the past four years. Notably, only the Islamic branches of conventional banks have been active in extending loans, while conventional banks reported a minimal debt retirement of Rs320 million, a stark decline from Rs117 billion retired in the same period last year.

Looking ahead, the government is expected to intensify its scrutiny of banks’ lending practices, particularly concerning farmers and SMEs. Upcoming meetings between financial regulators and banking executives may focus on strategies to enhance loan disbursement and ensure that the private sector receives the necessary support to foster economic growth.