Private Sector Retires Rs393bn in Debt in First 45 Days of FY27

Private-sector borrowing remained under pressure during the opening weeks of FY27, with businesses retiring a net Rs393.4 billion in bank debt between July 1 and August 15, according to data released by the State Bank of Pakistan (SBP).

 

The pace of debt repayment was significantly higher than the Rs232 billion recorded during the same period last year, highlighting continued weakness in private-sector credit demand and investment activity.

 

The trend poses a challenge for the government, which is seeking greater private-sector participation to achieve its 4% GDP growth target for FY27. Despite bank advances to the private sector increasing to Rs1.46 trillion in FY26, compared with Rs1 trillion in FY25, economic growth remained limited at 3.7%.

 

NBFI Lending Also Contracts

 

Non-Bank Financial Institutions (NBFIs) also experienced a contraction in financing during the period. Their borrowing recorded a net retirement of Rs25.3 billion in the first 45 days of FY27.

 

The figures suggest that businesses remain reluctant to take on fresh financing despite efforts by the government and SBP to stimulate private investment.

 

SBP Governor Jameel Ahmad has previously stressed that economic stabilisation alone is not enough to deliver high and sustainable growth. He has urged banks to reconsider their business models and expand financing to productive private-sector activities.

 

However, banks continue to prefer placing surplus liquidity in risk-free government securities rather than extending loans to private businesses.

 

High Interest Rates and Economic Uncertainty Weigh on Investment

 

High borrowing costs remain another major obstacle for businesses, making Pakistani products less competitive compared with regional markets.

 

Industry participants also pointed to several other factors discouraging private investment, including political uncertainty, tensions in the Gulf region, elevated oil prices and law-and-order concerns.

 

The continued disruptions involving goods transporters and controversy surrounding the petroleum levy have added to the uncertainty facing businesses.

 

The latest SBP data therefore points to a broader private-investment slowdown, with companies focusing on reducing existing liabilities rather than taking on new debt. Reversing this trend will require lower financing costs, greater economic certainty and stronger incentives for banks to channel liquidity toward productive sectors.