Investment in Government Securities Hits Record Rs49 Trillion

Investment in sovereign debt instruments has recorded a significant increase across Pakistan, with non-bank holdings reaching an all-time high of Rs11 trillion by the end of December 2025. This trend reflects a growing inclination among institutional investors and provincial governments to allocate capital toward low-risk government securities.

Total investment in government instruments—including Pakistan Investment Bonds (PIBs), treasury bills, and Sukuk—rose to Rs49.174 trillion by December 2025, up from Rs46.682 trillion in September 2025, marking an increase of approximately Rs2.5 trillion during the final quarter of the calendar year.

Banking institutions remained the dominant investors, collectively holding Rs38.254 trillion in government securities, thereby continuing to significantly outpace private-sector lending activities.

Within the non-bank segment—comprising insurance companies, mutual funds, corporate entities, and provincial governments—aggregate investments stood at Rs10.919 trillion. This included Rs4.008 trillion in treasury bills, Rs5.929 trillion in PIBs, and Rs982 billion in Sukuk instruments.

Provincial governments accounted for Rs1.179 trillion of these investments by December 2025, with projections indicating an increase to approximately Rs1.4 trillion in treasury bill holdings during the April–June quarter of FY2025–26, underscoring an increasing reliance on domestic borrowing mechanisms.

This pattern reflects a broader reallocation of liquidity toward financing government deficits rather than supporting private-sector credit expansion. This shift persists despite ongoing concerns regarding elevated debt servicing obligations, which continue to constrain fiscal capacity and limit development expenditure.

Private-sector credit growth has remained subdued, standing at Rs9.9 trillion as of June 2025, in contrast to the substantial exposure of banks to government securities, highlighting a structural imbalance in credit distribution.

Over the past three years, lending growth has averaged approximately Rs1 trillion annually or less, with analysts attributing this slowdown to prevailing economic uncertainty and persistently high borrowing costs.

The Asian Development Bank has projected Pakistan’s GDP growth at 3.5% for FY2026, indicating modest economic expansion amid constrained investment activity.

Market observers further note that elevated electricity tariffs, policy unpredictability, and high financing costs have adversely impacted industrial expansion. Consequently, certain firms have opted to relocate operations to alternative jurisdictions, including Central Asia, Egypt, and Mexico, thereby weakening domestic private investment momentum.