Private-sector borrowers repay around Rs370 billion in bank loans during July-August 2026, signalling greater caution amid higher interest rates and economic uncertainty.
KARACHI, September 10, 2026: Pakistan’s private sector repaid more than Rs370 billion in bank loans during the first two months of fiscal year 2026-27, significantly exceeding repayments recorded during the corresponding period of the previous fiscal year.
According to data released by the State Bank of Pakistan (SBP) on Thursday, private-sector borrowers repaid around Rs370 billion during July and August 2026, compared with approximately Rs214 billion during the same period of FY2025-26.
The sharp increase suggests that businesses may have preferred to retire existing debt rather than take on fresh bank financing amid uncertainty over interest rates, borrowing costs and the broader economic outlook.
Businesses turn cautious on bank borrowing
Financial market experts attributed the increase in loan repayments to expectations of higher interest rates following recent inflation readings and growing geopolitical tensions.
Businesses may also be prioritising debt reduction as borrowing costs rise and uncertainty over future economic conditions increases.
The latest figures indicate a more cautious approach towards bank financing at the start of FY2026-27, despite strong private-sector borrowing recorded during the previous financial year.
SBP reverses part of monetary easing
The SBP had previously reduced its policy rate from a record high of 22% to 10.50%, providing significant relief to borrowers and lowering financing costs.
However, renewed geopolitical tensions in the Middle East and their impact on international oil prices have heightened inflationary pressures.
Against this backdrop, the central bank raised its policy rate to 11.50%, reversing part of its earlier monetary easing.
Higher interest rates can discourage new private-sector borrowing by increasing the cost of financing. Businesses may instead choose to repay existing loans to reduce their exposure to higher interest expenses.
Private-sector borrowing rises in FY2025-26
Despite the increased repayments at the beginning of the current financial year, private-sector borrowing had recorded substantial growth during FY2025-26.
The private sector borrowed around Rs1.41 trillion from banks during FY2025-26, compared with approximately Rs1.08 trillion in FY2024-25.
The increase represented stronger financing activity during the previous financial year, when lower interest rates provided businesses with greater access to bank credit.
Higher repayments signal cautious outlook
The sharp rise in loan repayments during the opening months of FY2026-27 could signal that businesses are becoming more cautious about taking on additional debt.
Companies are likely to be assessing borrowing costs, inflationary pressures, international oil prices and the wider economic outlook before committing to fresh bank financing.
If interest rates remain elevated, demand for new private-sector credit could face further pressure, while businesses may continue to focus on managing or reducing existing liabilities.