Karachi, February 2, 2026 – Bank borrowing by Pakistan’s private sector fell sharply by 39% during the first seven months of the current fiscal year (July 2025–January 2026), despite a substantial cut in the State Bank of Pakistan (SBP) benchmark interest rate, according to data released on Monday.
The SBP reported that private sector credit dropped to Rs 666 billion between July 1, 2025, and January 23, 2026, compared with Rs 1,087 billion during the same period last year. The decline occurred even as the central bank slashed its policy rate from 22% to 10.50% over the past year, showing that lower interest rates alone have not been enough to revive business confidence.
Analysis of private sector credit trends highlights differing performance across banking segments:
| Banking Segment | Credit (Jul-Jan FY2026) | Credit (Jul-Jan FY2025) |
| Conventional Banks | Rs -85 billion | Rs 396 billion |
| Islamic Banks | Rs 244 billion | Rs 635 billion |
| Islamic Branches of Conventional Banks | Rs 507 billion | Rs 56 billion |
Experts noted that the recent relief package for exporters and industries announced by the Prime Minister may boost private sector borrowing in the coming months. While conventional banks and standalone Islamic banks recorded declines in lending, Islamic banking branches of conventional banks saw a significant increase, reflecting a shift in credit preferences among businesses.
The data underscores that structural reforms, improved investor confidence, and supportive policies are crucial to stimulate private sector lending, alongside monetary easing by the SBP.