Home Blog Page 28

Private sector credit doubles as borrowing costs fall in 2024-25

News Desk
-
0
Private sector credit doubles as borrowing costs fall in 2024-25

By Qudsia Bano

ISLAMABAD, Oct 18 (Wealth Pakistan): Pakistan’s private sector credit (PSC) doubled during fiscal year 2024-25 as a sharp reduction in interest rates, improved business confidence, and revival in manufacturing activity spurred demand for financing, according to the State Bank of Pakistan’s (SBP) Governor’s Annual Report 2024-25.

The report said that as the SBP’s Monetary Policy Committee reduced the policy rate by 1,100 basis points between June 2024 and June 2025, banks recorded a broad-based increase in lending across multiple sectors for both working-capital and fixed-investment purposes.

Credit offtake to businesses more than doubled compared with the previous year, reflecting lower borrowing costs and an expanding industrial base.

Textile firms remained the largest beneficiaries, accounting for nearly 36 percent of the total increase in business lending, driven by higher export orders, stable exchange rates, and reduced input-cost volatility.

Manufacturers in construction materials, autos, and chemicals also tapped banks for new financing to meet production targets and replenish inventories.

The central bank said that by mid-FY25, a noticeable pick-up in large-scale manufacturing output confirmed that credit transmission was feeding into the real economy.

On the supply side, banks actively sought new clients to avoid higher tax slabs that apply when their advance-to-deposit ratio stays below 50 percent.

This policy nudge encouraged institutions to expand lending portfolios rather than park liquidity in government securities.

As a result, lending to private businesses became the major driver of asset growth, while government borrowing from banks fell by 58 percent compared with FY24.

Deposits and borrowings together financed about 85 percent of the expansion in banking-sector assets.

The SBP noted that, although deposit inflows slowed amid falling interest rates, credit expansion remained strong enough to create liquidity pressures in the interbank market.

To manage these, the central bank increased open-market operations, keeping money-market rates close to the policy target.

Analysts see the surge in private-sector credit as a sign of renewed confidence after two years of tight financing conditions.

With headline inflation falling to 4.5 percent and a relatively stable rupee, businesses are again investing in capacity and employment.

However, the SBP cautioned that geopolitical tensions and regional uncertainties could still affect credit demand in FY26 if global conditions worsen.

Overall, the banking sector’s asset base rose 15 percent to Rs 59.6 trillion, with private credit emerging as a key component of the system’s balance-sheet expansion.

The SBP said this trend supports its objective of sustainable growth through productive lending rather than dependence on government borrowing.

Punjab worst hit by floods with 92% of total housing damage

News Desk
-
0
Punjab worst hit by floods with 92% of total housing damage

By Azeem Ahmed Khan

ISLAMABAD, Oct 18 (Wealth Pakistan): Punjab flood losses have been recorded as the most severe among all provinces, with the region accounting for 92 percent of total housing destruction and the largest share of overall economic damage during Pakistan’s 2025 floods, according to the Planning Ministry’s Preliminary Assessment Report.

The report places Punjab’s housing destruction at 213,097 out of 229,763 houses damaged or destroyed nationwide. It adds that Punjab also suffered massive agricultural and infrastructure devastation, including submerged croplands, broken bridges, damaged roads, and heavy livestock losses that severely affected livelihoods across rural districts.

The Ministry of Planning observed that Punjab’s vulnerability stems from its extensive river systems and densely populated floodplains. The 2025 monsoon season brought rainfall nearly 50 percent above long-term averages, inundating large areas of central and southern Punjab, including low-lying settlements near the Chenab and Sutlej rivers.

For background, see the Provincial Disaster Management Authority Punjab website.

Punjab flood losses and displacement impact

“Punjab was the epicenter of the humanitarian crisis,” the report said, adding that nearly four million people were displaced nationwide, with Punjab hosting the largest proportion.

According to data compiled by PDMA Punjab, roads and bridges worth over Rs137 billion were destroyed or rendered unusable. The province also reported heavy losses of livestock and food crops, including wheat, cotton, and fodder, as well as damage to small and medium enterprises in flood-hit districts.

Infrastructure damage across Punjab included 2,811 kilometers of roads and 790 bridges, most concentrated within the province. Disrupted connectivity slowed both emergency operations and market access for farmers and traders.

For context on national flood recovery, visit the Ministry of Planning, Development and Special Initiatives.

Reconstruction costs and recovery outlook

The report warned that reconstruction could take up to a decade in the worst-affected areas unless immediate resources are mobilized. Housing reconstruction alone is expected to cost around Rs92 billion, while overall Punjab flood losses are projected to exceed Rs400 billion once indirect impacts on employment and production are included.

“These are preliminary figures that will be refined after detailed field verification,” the report clarified.

Despite the extensive losses, Punjab’s relief and administrative response was rapid, supported by the armed forces and federal agencies. Temporary camps were established for displaced families, while emergency food, shelter, and medical supplies were distributed across flood-hit areas.

Climate-resilient rebuilding for future protection

Officials acknowledged that long-term rehabilitation—particularly housing reconstruction—will require sustained national and international financial support.

The report emphasized that Punjab’s agricultural and housing sectors must be rebuilt using climate-resilient designs to prevent similar destruction in future disasters. It recommended integrated floodplain zoning, improved drainage networks, and stronger embankments along major rivers.

“Punjab’s experience demonstrates how rapidly changing weather patterns are amplifying disaster intensity,” the document stated, urging that provincial development planning be aligned with Pakistan’s climate adaptation strategy.

The Planning Ministry warned that without structural reforms and resilient infrastructure investment, Pakistan’s economic heartland could remain exposed to recurring climate shocks, posing risks to national food security and GDP growth.

For additional data on provincial flood losses, refer to the Asian Development Bank’s disaster resilience overview.

SBP modernizes digital finance through RAAST payments, PRISM+

News Desk
-
0
SBP modernizes digital finance through RAAST payments, PRISM+

By Farooq Awan

ISLAMABAD, Oct 18 (Wealth Pakistan): Raast Payments Pakistan and PRISM+, the upgraded real-time settlement system, have been formally launched by the State Bank of Pakistan (SBP), marking a decisive step toward a fully digital economy and secure electronic payment infrastructure.

According to the SBP Governor’s Annual Report 2024-25, Raast Payments Pakistan has been incorporated as a wholly owned SBP subsidiary responsible for managing, governing, and expanding the country’s instant-payment platform.

The central bank stated that the creation of a separate company will strengthen operational agility, technological scalability, and governance as Pakistan’s digital transaction volumes continue to rise.

For further reference, visit the State Bank of Pakistan.

Raast Payments Pakistan to drive instant-payments expansion

The SBP report described Raast Payments Pakistan as a key pillar of its ongoing strategy to expand the national payments ecosystem, reduce cash dependency, and align domestic systems with international standards.

The new subsidiary will ensure the reliability of the Raast network, extend its reach to more financial institutions, and enforce security protocols needed for large-value and retail digital payments.

Officials said that FY2025 marked a turning point in Pakistan’s digital-finance journey, with the institutionalization of Raast and the simultaneous rollout of PRISM+.

PRISM+ replaces decade-old RTGS system

The Pakistan Real-Time Interbank Settlement Mechanism Plus (PRISM+) has replaced the country’s earlier real-time gross settlement (RTGS) system, in use for over a decade.

PRISM+ features significantly higher processing capacity and integrates the SBP’s first Central Securities Depository (CSD), enabling real-time settlement of funds and securities on a delivery-versus-payment basis.

This integration, the report said, reduces systemic risk and enhances liquidity management across the financial sector. It also provides straight-through processing of government securities, improved queue-management algorithms, and intraday liquidity facilities for participating institutions.

By improving interoperability between the CSD and payment engine, PRISM+ ensures faster fund turnover and better cash-flow management for banks, corporates, and government entities.

For detailed coverage, see the PRISM+ overview on SBP’s official portal.

Sandbox framework encourages fintech innovation

The central bank also reported the introduction of a Regulatory Sandbox Framework to support controlled testing of new digital payment products by fintechs, banks, and startups under regulatory oversight.

This mechanism enables innovators to trial emerging financial technologies safely before full-scale implementation, helping the SBP stay abreast of rapid global fintech developments while maintaining consumer and system protection.

Demonstrating early progress, digital-payment acceptance systems were installed at major cattle markets during Eid-ul-Azha 2025, allowing QR-code and mobile-based transactions between livestock buyers and sellers — a first for Pakistan’s informal economy.

Following the pilot’s success, digital-acceptance infrastructure is being expanded to retail and government-payment portals.

Digitization of government transactions

The SBP continued digitizing public-sector transactions, including tax receipts and welfare disbursements, through Raast and other electronic channels.

These efforts, combined with reforms in exchange companies, are expected to reduce cash handling, improve transparency, and cut the cost of financial intermediation.

According to the report, modernizing the national payment rails will help broaden financial inclusion and accelerate capital circulation. It will also support the SBP’s disinflationary and fiscal-consolidation goals by improving monetary transmission and curbing idle liquidity outside the banking system.

With currency-in-circulation still elevated, digital solutions such as Raast Payments Pakistan and PRISM+ are expected to route more transactions through formal channels, increasing deposit mobilization and lending capacity.

For insights into Pakistan’s financial inclusion initiatives, visit the World Bank’s Digital Finance in Pakistan page.

Strengthening financial stability and future outlook

The SBP described the digital-finance ecosystem as a foundation for macro-financial stability. By modernizing settlement systems, the bank said, it aims to reduce counterparty risks and ensure effective monetary-policy transmission.

In the long term, the central bank plans to link PRISM+ with cross-border settlement systems and expand Raast for government-to-person (G2P) and person-to-government (P2G) transactions, which account for a large share of daily cash use.

These upgrades, the report concluded, will move Pakistan closer to a transparent, efficient, and resilient digital economy.

SBP rolls out climate risk fund for microfinance banks

News Desk
-
0
SBP rolls out climate risk fund for microfinance banks

By Abdul Ghani

ISLAMABAD, Oct 18 (Wealth Pakistan): The State Bank of Pakistan (SBP) has created Climate Risk Fund-I to strengthen the resilience of Pakistan’s microfinance sector and small farmers against climate shocks.

According to the Governor’s Annual Report 2024-25, the fund launched under the World Bank’s Resilient and Accessible Microfinance (RAM) initiative will support climate-smart farming, flood recovery, and liquidity management for microfinance institutions (MFIs).

The SBP said the new facility follows years of strain in the microfinance industry caused by the pandemic, macroeconomic tightening, and the 2022 floods.

Despite these challenges, the sector showed clear improvement in FY25: total assets grew 13.9 percent to Rs 891 billion, loan-infection ratios fell, and provisions exceeded non-performing portfolios.

Aggregate losses shrank from Rs 18 billion in FY24 to Rs 5.9 billion, marking a three-fold improvement in profitability.

Climate Risk Fund-I will provide refinancing and concessional credit lines to MFIs and microfinance banks (MFBs) for lending to farmers adopting resilient technologies such as drought-tolerant seeds, solar irrigation, and crop-insurance schemes.

The SBP noted that the fund also offers liquidity support to institutions servicing borrowers in disaster-affected districts, ensuring business continuity and depositor protection.

The report said microfinance remains a vital pillar of Pakistan’s inclusion architecture. MFBs cater to low-income groups and small enterprises that conventional banks often overlook.

In FY25, investments in government securities accounted for about half of MFB asset growth, helping them meet the enhanced Statutory Liquidity Requirement (SLR) of 12 percent introduced under revised prudential regulations. Advances rose 10 percent, reflecting gradual recovery in rural-credit demand.

The SBP underscored that climate finance is now integral to financial stability. With Pakistan ranked among the world’s most climate-vulnerable nations, extreme weather threatens livelihoods and loan portfolios alike.

The new fund therefore links environmental sustainability with financial-sector soundness. It complements other measures, including enhanced supervision, stress-testing of MFBs, and guidance on disaster-risk management.

Under the RAM framework, the government and the SBP will continue collaboration with international partners to scale up the facility.

Future phases aim to integrate performance-based incentives, rewarding institutions that achieve measurable progress in climate adaptation and outreach to affected communities.

The SBP said the fund also aligns with its broader development mandate to maintain financial inclusion and macro-economic resilience.

By reducing default risk among climate-exposed borrowers, it indirectly supports credit quality across the banking system. The central bank reaffirmed that strengthening microfinance capacity remains essential to sustaining inclusive growth.

Infrastructure damage due to floods hits Rs307 billion

News Desk
-
0
Infrastructure damage due to floods hits Rs307 billion

By Ayesha Saba

ISLAMABAD, Oct 18 (Wealth Pakistan): Pakistan flood infrastructure losses have surpassed Rs307 billion as torrential rains and flash floods between June and September 2025 destroyed thousands of kilometres of roads, bridges, and power lines, severely disrupting the nation’s transport and energy networks, according to a preliminary assessment issued by the Ministry of Planning, Development and Special Initiatives.

The official document shows that more than 2,811 kilometres of roads and 790 bridges were destroyed or rendered unusable across the country. Punjab, Khyber Pakhtunkhwa, Gilgit-Baltistan, and Azad Jammu and Kashmir experienced the heaviest structural losses, while mountainous areas reported near-total collapse of link bridges due to landslides and cloudbursts.

The ministry warned that the breakdown of transport and logistics networks has reduced the sector’s projected growth for FY2026 by almost two percentage points.

“The transport and storage sector is now expected to grow only 1.5 percent, less than half its original target of 3.4 percent,” the report stated. “This slowdown will ripple through agriculture, industry, and commerce, all of which depend on reliable logistics.”

For more details, visit the Ministry of Planning and Development.

Power grids and transport networks among worst hit

Beyond transport, the power infrastructure also sustained significant damage — with collapsed transmission lines, uprooted poles, broken transformers, and disrupted grids causing prolonged blackouts in flood-hit regions.

Preliminary estimates place losses to the energy sector at around Rs25 billion, while the electricity, gas, and water supply subsector is now forecast to grow 2.8 percent instead of 3.5 percent.

The report emphasized that the collapse of bridges in Battagram, Gilgit-Baltistan, and AJK revealed the vulnerability of high-altitude infrastructure to extreme weather. It recommended “climate-resilient engineering, improved hydrological mapping, and flood-resistant materials” in future reconstruction.

More information on infrastructure resilience is available from the National Disaster Management Authority.

Financial breakdown and institutional response

Provincial submissions appended to the report indicate that the National Highway Authority (NHA) alone incurred over Rs14.4 billion in damages to federal roads. Provincial departments jointly reported losses exceeding Rs137 billion.

Pakistan Railways also recorded Rs3.79 billion in losses, including 16.2 kilometres of damaged track and Rs2.6 billion in revenue shortfalls from ticket refunds and suspended freight operations.

Economists cited in the report warned that continued supply-chain disruption will raise transport costs, delay industrial shipments, and fuel inflation already driven by agricultural losses.

The ministry cautioned that unless reconstruction begins urgently, Pakistan flood infrastructure losses could hinder export competitiveness and broader economic recovery.

For financial projections, see the Asian Development Bank’s Pakistan Disaster Resilience profile.

Long-term reconstruction and resilience planning

Rehabilitation experts estimate that rebuilding damaged infrastructure could take five to ten years, depending on funding availability and access to remote areas.

The government plans to allocate Public Sector Development Programme (PSDP) funds for road restoration and bridge reconstruction under “build-back-better” principles designed to enhance disaster resistance.

“The 2025 floods exposed critical weaknesses in national infrastructure and drainage planning,” the report concluded. “Future development must integrate disaster-resilient design, early-warning systems, and climate-informed budgeting across all sectors.”

National financial inclusion strategy 2024-28 targets 75% coverage

News Desk
-
0
National financial inclusion strategy 2024-28 targets 75% coverage

By Qudsia Bano

ISLAMABAD, Oct 17 (Wealth Pakistan): The Pakistan National Financial Inclusion Strategy 2024-28 has been launched by the State Bank of Pakistan (SBP) to provide formal financial access to 75 percent of the adult population by 2028 and reduce the gender gap to 25 percent. The new strategy aims to accelerate digital banking, fintech innovation, and women’s financial participation across the country.

Unveiled in the SBP’s Governor’s Annual Report 2024-25, the plan represents Pakistan’s most comprehensive roadmap for inclusive and technology-driven financial growth.

For details, visit the State Bank of Pakistan.

Goals of the Pakistan National Financial Inclusion Strategy 2024-28

The State Bank said the Pakistan National Financial Inclusion Strategy 2024-28 seeks to raise the inclusion rate to 75 percent and cut the gender gap in half. It builds on earlier initiatives such as the Raast instant-payments system, the Banking on Equality framework, and microfinance expansion.

Complementing this effort, the SBP launched the National Financial Education Roadmap (NFER) 2025-29 to promote financial literacy through curricula, awareness programs, and training for women entrepreneurs.

Digital inclusion and fintech growth under the strategy

The SBP report noted steady progress during FY2025. Agricultural lending rose 16.3 percent, SME financing increased 41 percent, and the number of SME borrowers climbed 57 percent. The report attributed these results to low-cost digital channels and branchless banking.

Integration with Raast Payments Pakistan (Pvt.) Ltd and the PRISM+ settlement platform will further enhance person-to-person and government-to-person payments, reduce transaction costs, and improve transparency.

For context, see the World Bank’s financial inclusion overview.

Women’s inclusion and coordinated implementation

The Pakistan National Financial Inclusion Strategy 2024-28 requires commercial banks to expand women-only branches, design credit products for female entrepreneurs, and collect gender-segregated data to measure progress.

Provincial governments have been instructed to link agricultural credit programs with the strategy’s targets, while telecom operators are supporting mobile-money penetration.

The SBP stressed coordination among ministries, regulators, and the private sector to ensure consistent execution.

Economic impact of the Pakistan National Financial Inclusion Strategy 2024-28

The State Bank said the Pakistan National Financial Inclusion Strategy 2024-28 will help formalize the economy, broaden the deposit base, and strengthen monetary transmission. By bringing millions of citizens into formal banking, Pakistan can boost savings, improve tax compliance, and support sustainable economic growth.

For regional comparisons, visit the Asian Development Bank’s digital finance programs.

1...262728Page 28 of 28