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KARACHI: Bank lending to the private sector for almost nine months of fiscal year 2025 increased rapidly, highlighting the increasing demand for credit from businesses and consumers while reducing economic recovery and borrowing costs.
According to Central Bank data published on Thursday, between July 1, 2024 and March 21, 2025, banks extended loans of Rs 481 billion, which increased by 352 % over a year, or 4.5 times higher, according to central bank data published on Thursday.
The latest private sector credit data is much lower than banks’ offensive debt during the second quarter of the financial year 25. By the end of December, bank loans were a total of Rs 1.98 trillion as their aim is to avoid the tax collection tax. However, the State Bank of Pakistan (SBP) noted in its monetary policy statement released last month that the credit for the private sector is at 9.4 %, which reflects the effects of ease of financial conditions and the ongoing economic recovery.
Saad Hanif, the head of the research in Ismail Iqbal Securities, said that due to improved liquidity situation, reduction of interest rates and gradual rehabilitation in business confidence, the private sector has increased bank credit to the private sector. Islamic banks have contributed significantly in the growth of this loan, while traditional banks have taken a more cautious approach.
Hanif added that “the change in government loans towards long -term devices has also helped free private sector loans’ Liquid liquidity. However, banks have a slowdown due to the impact of the risk of avoiding risk, more non -performance loans, and financial softening.
He noted, “It is expected that in the second half of the year, especially in the manufacturing and energy sectors, loans are expected, while SMEs and retail loans can be cured at a slow pace.”
“The extent of development will depend on the interest rate deductions, economic stability and willingness to increase banks’ credit.”
Pakistan’s gross domestic products (GDP) increased by 1.73 % in the three months ended in December, compared to the same period last year. For the period of July -September, growth was changed to 1.34 %. SBP GDP Growth Project for FY 25 is 2.5-3.5 %.
The SBP unexpectedly stopped its softening cycle last month, and the benchmark policy rate is 12 %, among concerns about inflation’s risks that lead to unstable food prices and global prices. The Central Bank has reduced its key interest rate (BPS) since June 2024.
Inflation in Pakistan is on the trend, and the country’s authorities attribute this reduction to economic stability under the International Monetary Fund’s loan program. Consumer prices index inflation has dropped 0.69 percent in March, the lowest rate recorded in seven years.
In 2023, the bank’s loan to the private sector in Pakistan was 12 % of GDP, which is less than 15 % in 2022. That number is significantly lower than 38 % of Bangladesh and 50 % of India. Pakistani banks have increased their focus on investment in government securities, which focuses more than 42 % in December 2023 and a further 19 % increase in June 2024, more than 95 % of their investment in government securities.
These recent private sector credit figures emerge when analysts assess the potential impact of US President Donald Trump’s decision to impose clear taxes on US imports. The move has threatened to give rise to the World Trade War, which can affect Pakistan’s exports to the United States, and as a result, the working capital needs of local businesses.
Arif Habib Limited said in a note that President Trump’s latest tariff over hall is examining Pakistan’s export sector. Now with a surprising 29 % duty that is heading to the United States on Pakistani goods, industries like textile, food, cement, and others are expected to feel pressure.
He said, “But in the midst of this tariff storm, Pakistan has a unique opportunity for the axis, namely, that is, the challenge is turning into opportunities. Although these revenue can reduce export competition and pressure foreign exchange earnings, but Pakistan is still the key to China, Vietnam and Vietnam.
