KARACHI: Although the government raised over Rs24 trillion through borrowing and enhanced revenues during the past two and a half years, heavy bank borrowing reduced the availability of credit for the private sector, constraining economic growth.

Official data released by the State Bank showed the government borrowed Rs8.519tr from banks in FY24, Rs5.434tr in FY25 and Rs2.1tr in the first seven months of the current fiscal year (FY26).

Total borrowing from banks during this period reached Rs16tr, almost 50 per cent of the total stock of government borrowing (Rs32.3tr) at the end of June 2025.

The country’s revenues nearly doubled in two years, marking a major turnaround, as the government’s total revenues jumped from Rs9.6tr to almost Rs18tr. This increase was driven by higher tax collection, new taxes and support from the central bank.

Revenues nearly doubled from Rs9.6tr to almost Rs18tr in two years

During this period, the government raised additional liquidity of Rs24.5tr through bank borrowing and higher revenue generation, but this was not reflected in the economy in terms of growth.

Despite this huge liquidity, the government could not accelerate economic activity, either due to policy failure or misdirected spending. The negative impact of banks’ lending to the government appeared in reduced lending to the private sector, which stood at a cumulative Rs2.2tr during the same period.

The staggering figure of Rs24tr appears sufficient to bring vital change to the economy, but spending remained unproductive, and for the last three years the country has struggled to achieve a better growth rate. The GDP growth target for this year is 3.7 to 4.7pc, and the State

Bank believes 3.7pc could be achieved in FY26.

However, despite low inflation of 5.6pc, the State Bank is not ready to cut the interest rate to allow a higher flow of liquidity to the private sector. The only recent incentive announced for the export sector was a reduction in the refinancing rate. The export sector has not shown any significant improvement.

Trade and industry have been demanding an interest rate in line with inflation, but policymakers appear satisfied with low but stable growth. Low economic growth has increased poverty each year, with 46pc of the population living below the poverty line.

The government has not presented any plan to address this serious issue of rising poverty. Low growth continues to increase unemployment and poverty, which is being addressed largely through charity.

Published in Dawn, February 7th, 2026