The State Bank of Pakistan (SBP) has reported a steep decline in profitability for the financial year 2024-25, highlighting the challenges facing the country’s central bank amid a volatile economic environment. According to its annual statement, the SBP’s profit fell by Rs. 751 billion, or 21 percent, compared to the previous year.
The central bank earned Rs. 2,500 billion during FY25, down from Rs. 3,414 billion in FY24. Despite the sharp fall in earnings, the SBP remitted a surplus profit of Rs. 2,428 billion to the federal government as required under existing legal provisions. This transfer continues to play a crucial role in supporting fiscal resources at a time when the government is struggling with high debt servicing costs and budgetary pressures.
The report shows that interest income, which makes up the bulk of SBP’s earnings, dropped significantly. It declined to Rs. 2,581 billion in FY25 from Rs. 3,273 billion in the previous fiscal year, reflecting lower yields and reduced returns from the central bank’s assets. Alongside this decline, the SBP also recorded a fall in its operating income while absorbing exchange losses over the course of the year.
In addition to its earnings profile, the SBP paid Rs. 14.3 billion in agency commission to banks operating as its agents for handling government transactions. These included the National Bank of Pakistan, Bank of Punjab, Sindh Bank, Bank of Khyber, and 1Link member banks. Through these arrangements, the banking institutions provide services on behalf of the SBP to both federal and provincial governments.
The annual statement also noted a significant rise in the SBP’s foreign currency accounts and investments, which reached Rs. 4,451 billion by the end of June 2025. This was a sharp increase from Rs. 2,722 billion recorded a year earlier, reflecting the central bank’s expanded foreign holdings and investments during the year under review.
It is important to note that the SBP’s income is exempt from taxation under Section 49 of the State Bank of Pakistan Act, 1956, as well as Clause 66 (xx) of Part I of the Second Schedule to the Income Tax Ordinance, 2001. This exemption ensures that the central bank’s profitability directly supports fiscal resources without being diminished by taxation.
Analysts suggest that the decline in profit underlines the stress on the SBP’s balance sheet from both domestic and external factors. Lower interest income and foreign exchange losses highlight the vulnerabilities associated with Pakistan’s macroeconomic position, including high borrowing costs, currency fluctuations, and pressures on reserves.
Nevertheless, the Rs. 2.4 trillion surplus handed over to the federal government underscores the SBP’s continued importance as a critical source of non-tax revenue. This transfer helps offset part of the fiscal deficit and provides essential support for government financing needs at a time when external funding remains constrained.
The SBP’s annual results also reaffirm the delicate balance between managing monetary stability and generating income to support the state’s fiscal framework. Going forward, improvements in exchange rate management, monetary stability, and reserve building will remain key to stabilizing the central bank’s profitability and financial contribution to the economy.