Banks' government securities holdings surge to PKR 42.56Tn

Pakistan's banking sector held PKR 42.563 trillion in government securities as of June 2026, up nearly sixfold from PKR 7.373 trillion in June 2018, highlighting the growing value of sovereign debt in commercial banks' investment portfolios.

Banks' holdings increased by PKR 35.19 trillion, or approximately 477%, during the eight-year period, according to data on government securities holdings.

By June 2026, banks accounted for 78.3% of the PKR 54.339 trillion in government securities held by the investor categories covered by the data, making them by far the largest investor category.

How have banks' government securities holdings grown?

Bank holdings increased from PKR 20.87 trillion in June 2023 to PKR 31.6 trillion in June 2024, PKR 36.774 trillion in June 2025 and PKR 42.563 trillion in June 2026. The latest annual increase was PKR 5.789 trillion, equivalent to 15.7%, according to the data.

The growth reflects the substantial role of commercial banks in holding government debt instruments and financing the government's borrowing requirements.

Government securities, including Treasury bills, Pakistan Investment Bonds and government Ijarah Sukuk, provide banks with opportunities to earn returns while offering the government a source of domestic financing.

Banks remained the dominant investor category throughout the period. However, their share of the reported holdings stood at approximately 80.4% in June 2018, compared with 78.3% in June 2026, indicating that their absolute holdings grew substantially even as their proportion of the market edged lower.

How have investments by other institutions changed?

Investments by insurance companies increased to PKR 3.223 trillion in June 2026 from PKR 751 billion in June 2018.

Funds' holdings rose to PKR 3.286 trillion from PKR 361 billion over the same period, while corporate investments increased to PKR 4.745 trillion from PKR 690 billion.

The June 2026 figures also showed provincial governments holding PKR 522 billion in government securities, a category not separately reflected in the earlier years of the data.

Overall, government securities holdings across the reported investor categories increased from PKR 9.175 trillion in June 2018 to PKR 54.339 trillion in June 2026.

The figures show that investment in government debt expanded across banks and other institutional investors, although commercial banks continued to account for the largest share.

What does this mean for private-sector lending?

The substantial investment in government securities highlights the close financial relationship between Pakistan's banking sector and the government.

While sovereign borrowing provides the government with financing, banks earn returns on securities that generally carry lower credit risk than lending to private businesses.

This creates the potential for a crowding-out effect, in which attractive returns on government debt encourage banks to allocate more funds to sovereign instruments rather than loans to businesses.

Such a shift could affect the availability and cost of private-sector credit, potentially constraining investment, industrial expansion and employment generation.

However, the securities holdings data alone do not establish whether lending to businesses declined during the period. Assessing the scale of any crowding-out effect would require separate data on private-sector credit and bank balance sheets.

The figures nevertheless highlight the importance of government borrowing in Pakistan's financial system, with banks holding nearly four-fifths of the government securities covered by the data as of June 2026.