Private Sector Credit Climbs 14.8% to Rs11.38 Trillion

State Bank of Pakistan (SBP) data shows that private sector credit expanded by 14.8% year-on-year, reaching Rs11.38 trillion at the end of June 2026, reflecting improving economic activity and a stronger appetite among banks to extend financing to businesses and consumers.

Outstanding private sector credit increased from Rs8.77 trillion in June 2024 to Rs9.92 trillion in June 2025, before accelerating further during FY2025-26 to Rs11.38 trillion.

Financing extended by banks to private sector enterprises climbed to Rs9.6 trillion by the end of June 2026, compared with Rs8.4 trillion recorded a year earlier.

Consumer financing also maintained strong momentum, increasing 25.4% year-on-year to Rs1.145 trillion, while auto financing recorded a notable 38% increase, reaching Rs381.68 billion.

Market observers noted that lending activity has recovered significantly after remaining largely subdued in FY2023, when fresh private sector financing amounted to only Rs46 billion. Credit expansion subsequently improved to Rs513 billion in FY2024 and further accelerated to Rs1.081 trillion during FY2025.

The improvement coincided with the State Bank of Pakistan's monetary easing cycle, under which the policy rate declined from 22% to approximately 11%–11.5% between mid-2024 and mid-2025.

Lower financing costs reduced businesses' working capital expenses while encouraging commercial banks to redirect funds towards private sector lending after extensive government borrowing had constrained credit availability over the previous two years.

The increase in financing was recorded across several key industries. Manufacturing sector credit rose to Rs6.01 trillion in June 2026 from Rs4.84 trillion two years earlier.

Similarly, financing extended to the wholesale and retail trade sector increased from Rs540 billion to Rs885 billion, while lending to the telecommunications sector grew from Rs386 billion to Rs549 billion over the same period.

Despite the stronger lending figures, analysts observed that most of the increase remained concentrated in short-term working capital financing rather than long-term investment and business expansion.

They further noted that Pakistan's investment-to-GDP ratio, estimated between 13% and 13.6%, continues to rank among the lowest in the region, suggesting that higher credit growth has yet to translate into broad-based capital investment.

Meanwhile, financing to the construction sector increased to Rs236 billion in June 2026 from Rs193 billion in June 2024, while lending to cement manufacturers recorded a comparatively modest increase from Rs232 billion to Rs245 billion.

The relatively slower growth in construction and cement financing indicates that the current recovery remains driven primarily by trade, consumption, and working capital requirements, rather than large-scale investment-led economic expansion.