Private sector credit (PSC) in Pakistan experienced a notable rise of Rs151.28 billion in a single week, reaching Rs10.68 trillion as of November 29, 2024, according to data released by the State Bank of Pakistan (SBP). This significant increase brings the cumulative PSC flow for the first five months of the current fiscal year (5MFY25) to Rs1.15 trillion.
In comparison, the previous fiscal year (FY24) saw a total of Rs364.21 billion in private sector loans, highlighting the substantial growth in credit disbursement during FY25. As a percentage of Gross Domestic Product (GDP), PSC rose to 10.1%, up from 10% a week earlier and 9% in June 2024.
The recent surge in private sector borrowing marks a turnaround from earlier trends, as credit demand remained subdued until the third quarter of FY24. However, the fourth quarter witnessed a resurgence, spurred by a moderate expansion in economic activity and persistent cost pressures in various industries.
Key contributors to this increase in PSC include a rise in agricultural output and improved performance in large-scale manufacturing (LSM). These sectors have seen significant activity, with expectations of further momentum in the coming months prompting industries to ramp up borrowing from the banking sector.
The uptick in agricultural production has played a crucial role, addressing domestic supply needs while potentially supporting export growth. Simultaneously, the recovery in LSM output reflects strengthening demand in key industrial sectors, encouraging businesses to seek additional financial support to meet operational and expansion needs.
The growth in private sector credit underscores the role of the banking sector in facilitating economic recovery and addressing financial needs across industries. Analysts suggest that continued improvements in economic indicators, along with supportive monetary policies, could sustain this momentum, driving further expansion in private sector borrowing.
Despite these positive developments, the long-term stability of private sector credit growth will depend on consistent economic reforms, improved access to finance, and strategies to mitigate inflationary pressures. Such measures are essential to ensure sustained credit flow and to reinforce the banking sector’s capacity to support economic growth across diverse sectors.