Economic Revival Takes Shape as Pakistan’s Private Sector Enters New Growth Phase

Private sector lending in Pakistan rose roughly 15% during fiscal year 2025-26, reaching its highest level in four years, according to Finance Minister’s Advisor Khurram Shehzad. Loans extended to the private sector grew by Rs1.46 trillion, pushing the cumulative total to Rs11.38 trillion.

Shehzad described the growing financial support for the private sector as evidence that business and productive economic activity are being actively promoted — a claim that gains some weight from where the new lending has actually flowed.

According to the advisor, roughly 89% of new private sector loans went to key productive sectors: manufacturing, wholesale and retail trade, and agriculture, rather than being concentrated in consumer lending or less productive segments of the economy.

Manufacturing alone received Rs657 billion in new loans, which Shehzad said reflects a significant expansion in industrial activity and production capacity. That sector-specific figure matters for assessing the credibility of the broader growth narrative, since manufacturing expansion typically signals genuine productive investment rather than short-term consumption-driven borrowing, and tends to have more durable knock-on effects for employment and export capacity.

Increased financial support to trade and agriculture, Shehzad said, has further improved production, business activity, and private investment. He characterized the overall rise in private sector credit as reflecting positive movement toward business confidence, economic stability, and sustainable, investment-driven growth.

This lending growth arrives against a backdrop of a Pakistani economy that has spent recent years working through IMF program conditions, persistent inflation pressures, and periodic currency volatility — conditions that have historically constrained private sector borrowing appetite and made banks more cautious about extending credit outside government securities. A genuine four-year high in private lending, if sustained, would represent a meaningful shift away from that cautious lending environment.

The manufacturing-heavy composition of this lending growth also connects to broader government priorities reflected in other recent economic initiatives, including efforts to expand domestic 5G phone manufacturing and revive shipbuilding and ship recycling capacity at Gadani — all part of a broader push toward strengthening Pakistan’s industrial and productive base rather than relying primarily on services or remittance-driven growth.

Whether this lending growth translates into measurable gains in industrial output, employment, and export performance over the coming fiscal year will be the real test of whether this represents durable economic momentum or a shorter-term credit expansion that doesn’t yet reflect deeper structural improvement in Pakistan’s investment climate. Continued monitoring of manufacturing output data and export figures in the months ahead will offer a clearer picture of whether this lending surge is translating into the productive capacity growth Shehzad describes.