Government borrowing rises sharply in FY26
State Bank of Pakistan on Monday reported that government borrowing from commercial banks surged to Rs3.45 trillion during the first 10 months (July-April) of fiscal year 2025-26.
The borrowing showed an increase of 33 percent compared with Rs2.59 trillion recorded during the corresponding period of the previous fiscal year.
Analysts said the sharp increase reflects the government’s continued financing requirements to manage the budget deficit.
Borrowing mainly through treasury bills and bonds
The government primarily raises funds from commercial banks through the sale of Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs).
Financial experts noted that higher government borrowing continues to absorb a significant portion of banking sector liquidity.
The trend also highlights the government’s reliance on domestic financing amid ongoing fiscal pressures.
Banking sector posts strong growth
According to the SBP’s Financial Stability Review 2025, Pakistan’s banking sector recorded strong growth during 2025 despite economic challenges.
The central bank said banks maintained resilience and stable performance throughout the year.
The banking sector’s balance sheet expanded by 17.8 percent in 2025 compared with 15.8 percent growth recorded a year earlier.
Investments in government securities increase
The SBP said the growth in the banking sector was largely driven by increased investment in government securities.
The share of government securities in total banking assets increased to around 62 percent in 2025, compared with 55.5 percent in the previous year.
Economists said commercial banks continued to prefer investment in risk-free government instruments due to attractive returns and relatively lower private sector credit demand.
The rising exposure of banks to government securities also reflects broader fiscal and monetary conditions in the economy.