Business Desk 
Oct 18, 2025
Pakistan’s banking sector shifted focus toward private businesses in the fiscal year ending June 2025, as the State Bank of Pakistan (SBP) reported a sharp drop in banks’ share of government financing.
According to the SBP’s Governor’s Annual Report for FY25, banks financed 74% of the budget deficit, compared to almost 100% in FY24, freeing up funds for the private sector and marking a key change in credit trends.
SBP’s Governor’s Annual Report for FY25
The report indicated that private sector credit (PSC) more than doubled in FY25 when faced with stronger economic activity, higher business confidence and lower interest rates.
Simultaneously, banking sector assets grew by 15.3%, which could be attributed to the increasing assets representing 52.4% of gross domestic product (GDP), with the majority of growth still coming from government securities investments.
While deposit growth remained slow in the banking sector, there was an increase in currency in circulation due to regional and domestic uncertainty.
Inflation decreased sharply, falling to an average Consumer Price Index (CPI) of 4.5% in FY25 from 23.4% in FY24, primarily due to fiscal consolidation and monetary easing.
The SBP reduced the policy rate by 1,100 basis points during the year but subsequently slowed rate reductions in the second half of the fiscal year as global trade tensions and oil prices became more volatile.
In support of financial innovation, the SBP initiated Raast Payments Pakistan (Pvt) Ltd, developed the new PRISM+ settlement system, and expanded digital payment systems across the country.
