Private sector borrowing rises as lower interest rates spur credit demand

Private companies increased borrowing during the first nine months of the current fiscal year, benefiting from monetary easing that helped support economic activity.

According to the Economic Survey 2025-26, the impact of ongoing monetary easing has been transmitted to key interest rates, particularly lending rates, contributing to a pickup in private-sector credit.

During July-March FY2026, credit to the private sector increased by PKR 934.1 billion, compared with PKR 767.6 billion during the same period last year. This represented year-on-year growth of 12%, compared with 13% a year earlier.

Within private-sector credit, loans to private-sector businesses reached PKR 810.7 billion, compared with PKR 888.2 billion during the same period last year. These loans accounted for about 80% of total private-sector credit.

Credit was mainly availed by the manufacturing, wholesale and retail trade, transport and storage, and agriculture sectors, indicating that demand remained concentrated in productive sectors.

Within business lending, demand came from both working capital and fixed-investment loans. Working capital loans stood at PKR 492.8 billion during July-March FY2026, compared with PKR 646.6 billion during the same period last year. The manufacturing sector accounted for the largest share of working capital borrowing, amounting to PKR 342 billion.

Major borrowers included producers of food products, rice processors, sugar mills, cement manufacturers, computer, electronic and optical product makers, electrical equipment producers, battery and accumulator manufacturers, fiber-optic cable makers, and motor vehicle manufacturers.

Traditionally, the textile sector has been the largest borrower among manufacturing industries. During the period under review, textile-sector borrowing for working capital stood at PKR 33.2 billion, significantly lower than PKR 257.5 billion a year earlier, partly reflecting lower input costs.

Meanwhile, demand for fixed-investment loans increased to PKR 387.7 billion from PKR 259.2 billion last year. The manufacturing sector accounted for a larger share of these loans, particularly in chemicals, non-metallic mineral products and cement.

In addition, the wholesale trade, transport, construction, and professional, scientific and technical services sectors recorded higher demand for fixed-investment financing.

A large and growing consumer base supported capacity expansion and efficiency-enhancing investments, particularly in food and fast-moving consumer goods industries. Manufacturers in the edible oil, poultry and sugar sectors increasingly focused on modernization, cost reduction and energy-efficient technologies, driving demand for long-term financing.

The increase in private-sector credit was largely attributed to a supportive policy stance, positive real interest rates and an improved macroeconomic outlook. These factors strengthened business confidence and supported both investment and operational financing during the period under review.

The trend is encouraging for a sustainable economic recovery, provided credit continues to flow toward productive and export-oriented activities.