KARACHI: Finance Minister Muhammad Aurangzeb said on Wednesday State Bank of Pakistan (SBP) Governor Jameel Ahmad was scheduled to meet chief executive officers (CEOs) of commercial and microfinance banks in the coming days, with an aim to direct the banks ramp up financing to the private sector, particularly to the priority sectors.
“I am not going to accept that banks are not willing to step up in terms of providing credit to the private sector,” Aurangzeb, who is also a senator, said while speaking at the Karachi Chamber of Commerce (KCCI) on Wednesday.
The finance minister said that in response to a point raised by a KCCI-associated businessman that the share of credit to the private sector in total credit portfolio had declined and remained stagnant over the past two years despite return of stability in macroeconomics.
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The businessman pointed out that the share of credit to the private sector had stood at 23.8% in June 2023. The share had dropped to 20.3% in June 2024 and remained stagnant at 20.2% in June 2025, they added.
“This week, [SBP] governor will hold a meeting with banks and their CEOs. The financing to the private sector should be stepped up, particularly to the priority sectors, including affordable housing, EV (electric vehicle) policy, agriculture, and small farmers,” Aurangzeb said.
The finance minister said the government had devised a policy to provide collateral-free financing and subsidies financing to small farmers despite a tight budget for the ongoing fiscal year 2025-26.
“The policy provides a partial risk coverage to banks involved in offering the financing to small farmers. Despite providing subsidy and partial risk coverage to banks, if they do not increase the funding to the private sector then it is unacceptable.”
He further said the government had reduced its debt servicing (interest payment on the debt) last year and expected to further cut it in the ongoing year as well.
“We are trying our best to make the government take less borrowing. We have also bought back local debt from banks to improve debt and liability management”
Earlier, a former KCCI president Jawed Bilwani stated that the share of Pakistan’s government borrowing in total loans by banks had stood at over 90%.
“Contrary to this, the share of government borrowing in Bangladesh stands in single digit. Excessive government borrowing has crowded out the private sector, compromising business and economic activities in the country,” Bilwani maintained.
‘FATA/PATA exemptions causing losses to businesses’
Meanwhile, another businessman said the tax exemptions given to industries set up in the Federally Administered Tribal Areas (FATA) and the Provincially Administered Tribal Area (PATA) were causing “heavy losses” to similar industries in other parts of the country, as the “exemptions and incentives have imbalanced the level playing fields nationwide”.
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Reportedly, iron and steel makers, ghee and cooking oil manufacturers and other industries have been set in FATA/PATA.
While responding to that, Aurangzeb said, the government had imposed a sales tax at 10% in FATA and PATA “despite a challenging situation, but yes they still remained income tax exempted areas”.
“We have started with a 10% sales tax in FATA/PTA in FY26 budget and we will take it forward in the next budget,” the minister said.
