• Private sector borrowing remains just 21pc of total bank advances
• Central govt debt soars to Rs76tr
KARACHI: Bank lending to the government has exceeded Rs44 trillion, while lending to the private sector accounts for just 21 per cent of total advances, highlighting the growing imbalance in the country’s credit landscape.
According to the latest data released by the State Bank of Pakistan (SBP), government borrowing from banks surged by Rs8.5tr in FY24 alone. In stark contrast, private sector lending fell to a mere Rs46bn in FY23, rose modestly to Rs513bn in FY24, and stands at around Rs742bn so far in FY25.
As of May, the government’s holdings of market securities stood at Rs44.889tr, of which 78.9pc (Rs35.440tr) were held by scheduled banks and 21.1pc by non-bank entities.
Notably, the corporate sector is increasingly parking its liquidity in government securities, a trend that underscores the diminishing appetite for or opportunity in real-sector investment. Corporate holdings in government papers have now reached Rs9.5tr — capital that, in a healthier economy, would be channelled into industrial expansion and job creation.
This shift toward risk-free government paper has profound economic implications. Private sector credit stagnation has contributed to an average GDP growth of just 1.7pc over the past three years — far below the level needed to absorb Pakistan’s growing labour force and meet the rising costs of housing, health, and education for over 250 million citizens.
The government has acknowledged the lacklustre performance of the agricultural sector, with wheat farmers, in particular, being hit by a 21% drop in wheat prices this year, further eroding rural incomes and disincentivising production.
SBP data up to May 31 shows that scheduled banks’ largest exposure is in Pakistan Investment Bonds (PIBs), totalling Rs24.7tr, while the corporate sector has invested Rs5.05tr in PIBs. Ijara Sukuk (Islamic bonds) have attracted over Rs6tr, with more than 88pc held by scheduled banks. Market Treasury Bills (MTBs) saw total investments of Rs9.084tr — Rs5.399tr by banks and Rs3.685tr by corporates.
Meanwhile, the central government’s total domestic debt rose to Rs53.468tr and external debt to Rs22.585tr by May. This brought the total government debt to Rs76.045tr, up Rs7.131tr from Rs68.914tr in June 2024.
Published in Dawn, July 16th, 2025
