KARACHI: Investors across the country, including the non-banking sector, continue to channel funds into government securities, with non-bank investments reaching a record Rs11 trillion by the end of December 2025.
Latest data shows that provincial governments have also joined the trend of investing in domestic bonds and are expected to invest around Rs1.4tr in treasury bills during the April-June quarter of 2025-26.
The growing reliance on government borrowing highlights concerns over rising debt levels, which consume a significant portion of the budget each year and often lead to cuts in development spending. Despite this, no comprehensive strategy has been announced to curb expenditure. Provincial governments’ planned investment of Rs1.4tr in treasury bills between April and June 2026 reflects the attractiveness of risk-free returns, but it also indicates the availability of liquidity that could otherwise be directed towards productive sectors of the economy.
The surge in investment in government papers became more pronounced in the last quarter of CY2025, rising by Rs2.5tr to Rs49.174tr by the end of December 2025 compared to Rs46.682tr in September 2025.
Total securities rise to Rs49.17tr by end-Dec 2025
The non-bank sector — comprising insurance companies, mutual funds, corporates and provincial governments — accounted for a significant portion of these investments. By end-December, provincial governments alone had invested Rs1.179tr.
Non-bank investments included Rs4.008tr in treasury bills, Rs5.929tr in Pakistan Investment Bonds (PIBs) and Rs982 billion in Sukuk, bringing the total to Rs10.919tr by end-December 2025.
Banks, meanwhile, had invested Rs38.254tr in PIBs, treasury bills and Sukuk bonds by the same period.
The data suggests that a large share of available liquidity is being directed towards government borrowing rather than private-sector investment. While the government has also opened avenues for retail investors to purchase these instruments, the trend indicates that funds are increasingly being parked in non-productive assets.
This comes at a time when economic growth remains below potential. The Asian Development Bank has recently projected Pakistan’s GDP growth at 3.5pc for FY26, reflecting modest expansion.
Private-sector lending has remained subdued over the past three years. Experts attribute the slowdown to economic uncertainty, further exacerbated by the ongoing regional conflict in the Gulf.
Banks have invested more than four times as much in government securities as compared to lending to the private sector. The stock of private-sector lending stood at Rs9.9tr by June 2025 compared to banks’ total investment of Rs38.2tr in government papers. Lending growth has remained weak over the past three years, increasing by around Rs1tr annually or less.
High borrowing costs, along with structural challenges such as elevated electricity tariffs, have already forced hundreds of companies to relocate operations to countries such as those in Central Asia, Egypt and Mexico, further dampening domestic investment activity.
Published in Dawn, April 12th, 2026
