KARACHI: The country has yet to emerge from an investment-averse environment, as reflected in private sector credit offtake during the first quarter of the current fiscal year.
Latest State Bank data for the first two-and-a-half months of the fiscal year show that the private sector is still retiring debt. Between July 1 and Sept 11, total debt retirement stood at Rs364.5 billion against Rs170bn in the same period last year.
The previous fiscal year had also witnessed a similar trend during the first quarter, although the situation improved by the end of the year when total private sector borrowing reached Rs1.4 trillion compared to Rs1tr in the preceding year.
However, despite higher private sector borrowing in FY26, there was little sign of long-term investment in trade and industry. The economy grew by 3.7pc. The Asian Development Bank (ADB) said on Wednesday that the country was expected to achieve 3.7pc growth in FY27, indicating limited improvement compared to the previous three years.
Debt retirement more than doubles to Rs364.5bn by Sept 11
Private sector participation has remained subdued over the past three years, keeping economic growth below 4pc during the period.
Investors cite several reasons for the lack of participation in new investment, with high interest rates identified as one of the biggest hurdles.
The government has launched the Apna Ghar scheme to stimulate economic activity, while the prime minister has urged banks to participate more actively in an effort to revive the construction industry, which supports more than 40 allied industries.
Following the Gulf war, land prices in Pakistan have increased as some funds that previously went into property purchases in Dubai were redirected towards the domestic market.
Further details of SBP data show that debt retirement by conventional banks during the period stood at Rs194bn compared to Rs76.4bn a year earlier.
Similarly, debt retirement by Islamic banks amounted to Rs165bn against Rs139bn last year, while Islamic banking branches of conventional banks recorded debt retirement of Rs5.5bn against net borrowing of Rs45bn in the corresponding period.
FY26 was stronger than the preceding year in terms of private sector credit offtake. Credit lending by conventional banks in FY26 stood at Rs290.7bn compared to Rs405bn in the preceding year. Lending by Islamic banks was Rs339bn compared to Rs518bn, while Islamic banking branches of conventional banks extended Rs833bn in FY26 against Rs158bn in the preceding year.
Published in Dawn, September 24th, 2026
