KARACHI: Pakistan’s banking sector assets grew to 52.4 per cent of GDP in FY25, up from 49.1pc in the preceding fiscal year, reflecting a stable financial system and stronger risk management practices, according to the State Bank of Pakistan’s (SBP) Governor’s Annual Report (GAR) released on Friday.

The report noted that the adoption of IFRS-9 accounting standards since January 2024 improved banks’ loss-absorption capacity and overall solvency. The sector maintained stability across major indicators, although concerns remain over limited private sector lending, with the banking system largely dependent on government securities for profits — a point also highlighted in the SBP’s State of Pakistan’s Economy report the day before.

Macroeconomic conditions improved in FY25 due to a combination of tight monetary policy and sustained fiscal consolidation. Average national CPI inflation dropped sharply to 4.5pc in FY25, compared to 23.4pc in FY24 and 29.2pc in FY23. This marked the continuation of a disinflationary trend that began last year.

Food inflation declined substantially due to improved domestic supplies and lower global prices. Energy inflation also eased, driven by downward revisions in administered tariffs and softer international oil prices.

In response, the Monetary Policy Committee (MPC) reduced the policy rate by a cumulative 1,100 basis points between June 2024 and June 2025. However, monetary easing slowed in the second half of FY25 due to persistent core inflation, rising global trade tariffs, and geopolitical uncertainties.

The fiscal deficit narrowed to 5.4pc of GDP in FY25, reaching a multi-year low, while the primary surplus rose to 2.4pc.

Meetings with rating agencies

SBP Governor Jameel Ahmad met senior executives from major global banks and credit rating agencies on the sidelines of the IMF-World Bank Annual Meetings in Washington (Oct 13-18). He highlighted improvements in Pakistan’s macroeconomic indicators and outlined prospects for investment and growth revival.

Published in Dawn, October 18th, 2025