Government Slashes Development Loan Mark-Up Rate

The federal government has significantly reduced the annual mark-up rate on development loans and advances for FY2025-26 to 11.89%, compared with 17.74% in the previous fiscal year, according to a notification issued by the Ministry of Finance.

The ministry announced that the final mark-up rate on cash development loans extended to provincial governments, loans provided to local bodies, financial and non-financial institutions, other corporations, and federal government capital outlays in commercial departments has been fixed at 11.89% per annum for FY2025-26.

The revised rate is 5.85 percentage points lower than the 17.74% applicable in FY2024-25 and is also below the 17.84% charged during FY2023-24.

The new mark-up rate will apply across three key categories: cash development loans to provincial governments, loans granted to local bodies, financial and non-financial institutions and other corporations, and capital investments made by the federal government in commercial departments.

The Finance Ministry further stated that the same 11.89% annual mark-up rate will also apply to government advances provided for house construction and vehicle purchases during FY2025-26.

The decision has been formally communicated to the Controller General of Accounts (CGA) in Islamabad through an official notification.

The reduction in the mark-up rate is expected to lower debt-servicing costs for provincial governments and public sector entities relying on federal development financing, while also making house-building and vehicle purchase advances more affordable for government employees.