Pakistan banks’ credit to private sector in ratio of GDP declines over past three decades
State Bank of Pakistan (SBP) Governor Jameel Ahmad has noted that commercial banks’ lending to the private sector remains well below levels seen in peer economies in the emerging markets, while the private sector credit-to-GDP ratio declined significantly over the past three decades in the country. “The government’s budgetary financing needs were not the only explanation for this trend [low…
The State Bank of Pakistan's Governor Jameel Ahmad has highlighted that commercial banks' lending to the private sector in Pakistan remains significantly lower than levels seen in emerging market peers. Over the past three decades, the private sector credit-to-GDP ratio has witnessed a substantial decline in the country. Ahmad spoke at the 11th Pakistan Banking Awards 2026, emphasizing that despite the government's budgetary financing needs, several emerging economies with higher government domestic debt have managed to achieve higher private-sector credit-to-GDP ratios.
The central bank chief urged banks to reorient their business models to focus on stronger retail deposit mobilisation and increased private-sector financing. He stressed the critical role of the banking sector in supporting Pakistan's future sustainable economic growth. Ahmad pointed out that while policymakers successfully stabilized the economy, further growth requires the banking sector's involvement.
He noted that banks' total assets reached Rs69 trillion, with deposits at Rs43 trillion at the end of June 2026. The profitability of banks remained strong, with their Capital Adequacy Ratio comfortably above international benchmarks and domestic regulatory requirements.
However, Ahmad pointed out that despite substantial growth, the banking sector's assets and deposits remain relatively low as a share of GDP compared to other emerging markets. He also highlighted that Pakistan's currency circulation-to-deposit ratio remains elevated, revealing room for further reducing reliance on cash and strengthening the deposit base.
Ahmad discussed Pakistan's resilient economy despite facing challenges such as domestic and external shocks, including severe floods, geopolitical tensions, and an uncertain global trade environment. Inflation averaged close to the medium-term target range, with inflation expectations remaining broadly anchored, and the current account deficit staying close to the lower bound of the projected range.
Foreign exchange reserves continued their upward trajectory, exceeding the end-June target of $18 billion, with the quality of reserve accumulation improving due to SBP's foreign exchange purchases rather than debt-driven accumulation.
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