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SBP profit falls PKR 2,505 billion on back of interest rate cuts

Central bank remitted surplus profit of PKR 2,428 billion to federal government

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SBP profit falls PKR 2,505 billion on back of interest rate cuts

State Bank of Pakistan

SBP Web

The State Bank of Pakistan’s (SBP) profit declined by a substantial PKR 751 billion in fiscal year 2024-25, marking a 26.5% decrease compared to the previous year, according to the central bank’s annual financial statement.

The SBP earned PKR 2,505 billion in profit in FY25, down from PKR 3,420 billion in FY24. Despite the decline, the bank remitted a surplus profit of PKR 2,428 billion to the federal government, as mandated by law.

The decline in profit was due to lower interest income — the SBP’s largest revenue component — which dropped significantly to PKR 2,581 billion in FY25, compared to PKR 3,273 billion a year earlier.

One major reason is the gradual reduction in interest rates during FY25. As inflation showed signs of easing, the SBP began scaling back its policy rate from historic highs. Lower interest rates meant reduced returns on government securities and lending to the banking sector — two primary sources of the SBP’s interest income.

In addition, the government’s reduced reliance on domestic borrowing from the central bank may have contributed to the decline. With increased access to external financing, including multilateral inflows and support from bilateral partners, the federal government issued fewer domestic instruments through SBP channels.

Another factor could be the maturity profile and revaluation of the central bank’s domestic asset portfolio. If a significant portion of high-yield instruments matured and were replaced by lower-yielding ones, the overall interest income would naturally decline.

Finally, a more stable exchange rate and less volatile domestic liquidity conditions may have resulted in lower frequency or volume of monetary operations — another contributor to lower earnings from interest.

While the fall in interest income impacted overall profitability, it also reflects a transition toward a more stable macroeconomic environment, where inflation and borrowing pressures are easing.

Additionally, the central bank’s overall operating income decreased, and it reported exchange losses for the fiscal year.

The SBP also posted a loss of PKR 55 billion during FY25, in contrast to a gain of PKR 186 billion in FY24.

As part of its operations, the SBP paid PKR 14.3 billion in agency commissions to partner banks, including the National Bank of Pakistan, Bank of Punjab, Sindh Bank Limited, Bank of Khyber, and 1Link member banks. These banks provide banking services to federal and provincial governments as agents of the SBP.

Despite the decline in profits, the SBP expanded its foreign currency holdings and investments, which rose to PKR 4,451 billion by June 30, 2025, a significant increase from PKR 2,722 billion at the end of FY24.

Why SBP profit matters for the economy

The SBP’s profit, particularly the amount remitted to the federal government, plays a crucial role in supporting Pakistan’s fiscal position. A high remittance from the central bank helps reduce the government’s reliance on external borrowing and narrows the fiscal deficit.

While the decline in SBP’s profit signals pressure on key income streams like interest earnings and foreign exchange operations, the PKR 2,428 billion transferred to the government still provides essential budgetary support.

Moreover, the growth in the SBP’s foreign reserves indicates a stronger external position, which is vital for maintaining macroeconomic stability, supporting the exchange rate, and meeting external debt obligations.

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