KARACHI: Pakistan’s advance-to-deposit (ADR) ratio has been declining, and private sector lending has experienced a significant drop, according to a PwC report for the year 2025.

“Pakistan’s ADR ratio has been gradually contracting, standing at 35 per cent in June 2025, following an increase from 41pc in 2023 to 49pc in 2024,” said the report.

The latest report to March 2026 shows that the ADR has slightly improved to 38.8 per cent, but it is still well below the level required to accelerate economic growth.

“Concurrently, lending to the private sector declined to 11pc of GDP in 2024. Conversely, the investment-to-deposit ratio (IDR) has increased significantly, from 40pc in 2010 to 93pc in 2024 and reaching 100pc as of June 2025,” said the PwC report.

Investments hit Rs39.1tr, IDR at 104.3pc as private lending stays weak

However, Arif Habib’s latest report shows that the IDR jumped to 104.3pc in March 2026.

Banking deposits increased by 18.6pc compared to the last year to Rs37.5 trillion as of March 31 (March 2025: Rs31.6tr), while advances increased by 8.1pc to Rs14.6tr during the same period (March 2025: Rs13.5tr).

The highest growth was in investments in government securities, which jumped by 20.8pc to Rs39.1tr, compared with Rs32.4tr in March 2025.

This data indicated a continued trend of low private-sector lending relative to deposit growth, with a significant portion of bank funds invested in government securities rather than in loans to businesses.

It was also witnessed during the last auction of treasury bills held on Wednesday, when investors (mainly banks) came out with a huge liquidity of Rs3.8tr to invest in government papers. The 100bps rise in the SBP policy rate to 11.5pc further enhanced the appeal of treasury bills, with returns reaching as high as 12pc.

Researchers believe that the huge liquidity has no option but to invest in the government papers, as lending to the private sector has become riskier due to the recent developments in the region. The Gulf war has not only increased the cost of production, but it has also reduced the purchasing power of the general public.

The 10.9pc inflation in April and the higher cost of borrowing have further reduced any chance of possible investors taking risk. Both bankers and trade industry people feel there is a higher chance of default due to the cost of money.

Most people in trade and industry believe that this is not the right time to borrow or invest anywhere except in government papers. However, borrowing for working capital was noted during FY26; it is a short-term borrowing without a long-term target.

Published in Dawn, May 3rd, 2026