Pakistan’s private-sector borrowers repaid Rs. 393.4 billion in bank debt during the first 45 days of FY27, reflecting weak demand for business financing amid high borrowing costs and continued economic uncertainty.
According to State Bank of Pakistan (SBP) data, private-sector borrowers retired Rs. 393.4 billion between July 1 and August 15, 2026, compared with Rs. 232 billion during the same period last year.
The sharp increase in debt repayments indicates that businesses are remaining cautious about taking new loans and expanding their borrowing.
The latest figures show that businesses repaid more bank debt than they borrowed during the period.
The subdued credit demand comes despite the government’s efforts to encourage private-sector investment and economic activity. The government has set a GDP growth target of more than 4% for FY27.
Private-sector lending had increased during FY26, with banks’ advances to businesses rising to Rs. 1.46 trillion, compared with around Rs. 1 trillion in FY25.
However, the higher lending failed to translate into stronger economic growth, as Pakistan’s GDP expanded by 3.7% in FY26.
Demand for financing from non-bank financial institutions (NBFIs) has also remained subdued.
NBFIs retired a net Rs. 25.3 billion in financing during the first 45 days of FY27, further highlighting weak demand for private-sector credit.
The development comes despite repeated calls from the SBP for banks to increase lending to businesses and productive sectors.
One of the major challenges is banks’ continued preference for government securities, which provide relatively low-risk investment opportunities compared with lending to private businesses.
High borrowing costs are also discouraging companies from taking new loans. Expensive financing can increase production costs and make locally manufactured goods less competitive against products from regional markets.
The continued decline in private-sector borrowing could create challenges for Pakistan’s economic growth ambitions.
With businesses reducing their reliance on bank financing, weaker investment and expansion could limit private-sector activity and make it more difficult to achieve the government’s FY27 growth target above 4%.
The latest SBP data therefore highlight the need for stronger credit demand and improved financing conditions if private-sector investment is to play a larger role in supporting economic growth.
