Islamabad, Pakistan – New data from the State Bank of Pakistan (SBP) shows bank lending to the private sector has dropped drastically, falling 86.3% year-over-year between July 2022 and January 2023.
Total bank loans to the private sector increased slightly from Rs. 9.17 trillion at the end of fiscal year 2022 to Rs. 9.22 trillion in the current fiscal year. However, net new borrowing by the private sector was only Rs. 57.4 billion, compared to Rs. 418.9 billion in the same period last year – a decrease of Rs. 361.5 billion.
Conventional banks loaned just Rs. 34.8 billion to the private sector from July 2022 to January 2023, versus Rs. 452.6 billion last year. Islamic banks loaned Rs. 62.4 billion, down 85.3% from Rs. 426 billion last year.
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Meanwhile, the government returned Rs. 814 billion to the SBP over this period, while borrowing Rs. 2.67 trillion from scheduled banks for budgetary support.
The sharp decline in lending highlights ongoing economic challenges and hesitancy by banks to finance new private sector projects and growth. SBP will likely continue policies to encourage lending as access to credit tightens.
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