Govt Nets Rs1.192tn Bank Borrowing in H1-FY26

During the first half of FY26 (July–December 2025), the federal government resorted to substantial net borrowing of Rs1.192 trillion from scheduled commercial banks, marking a pronounced shift from the previous fiscal year when it had retired Rs1.255 trillion in bank debt over the comparable period. This reversal underscores elevated government expenditure levels in H1-FY26 relative to the prior year, despite concurrent improvement in tax revenue performance.

The Federal Board of Revenue (FBR) mobilised Rs6.159 trillion in the first six months of FY26, reflecting a credible 10% year-on-year increase from Rs5.618 trillion collected in the same period of FY25. Nevertheless, collections fell short of the half-year target by Rs331 billion (target: Rs6.490 trillion), highlighting ongoing challenges in meeting budgeted revenue ambitions.

The reliance on bank financing persists notwithstanding the significant fiscal support received from the State Bank of Pakistan (SBP), which transferred its record net profit of Rs2.5 trillion for FY25 to the federal exchequer. This substantial one-off inflow has not materially alleviated the need for continued domestic borrowing to finance budgetary requirements.

Scheduled banks have demonstrated sustained appetite for government securities, viewing them as a secure, high-yield deployment of surplus liquidity amid subdued private-sector credit demand. This preference has contributed to overall financial sector resilience and stability.

Evidence of strong demand was visible in recent treasury bill auctions, where banks submitted bids totalling Rs2.5 trillion, reflecting continued preference for risk-free government paper. The SBP’s Annual Report for FY2024–25 further confirms that investments in government securities remained the dominant factor propelling balance sheet expansion within the banking industry throughout the year.