By Farooq Awan

Pakistan’s monetary indicators improved during FY2026, with the policy rate maintained at 10.5 percent, money supply expanding by 3.5 percent and private sector borrowing increasing significantly, according to the Monthly Economic Update & Outlook released by the Finance Division.

The Monetary Policy Committee, in its decision on March 9, 2026, kept the policy rate unchanged at 10.5 percent, indicating a stable monetary stance amid evolving economic conditions.

During the period from July 1 to February 27 of FY2026, broad money supply (M2) recorded a growth of 3.5 percent, compared to a contraction of 0.4 percent in the same period last year.

The increase in money supply reflects improved liquidity conditions in the banking system, supported by both foreign and domestic asset growth.

Net foreign assets (NFA) of the banking system increased by Rs886.1 billion during the period, compared to an increase of Rs747.4 billion last year, indicating stronger external inflows.

Net domestic assets (NDA) also recorded a rise of Rs523.3 billion, in contrast to a decline of Rs873.1 billion in the same period last year.

Government borrowing for budgetary support stood at Rs377.3 billion during the period, compared to Rs26.5 billion in the previous year, reflecting increased financing requirements.

At the same time, credit to the private sector showed notable growth. Private sector borrowing increased to Rs928.7 billion, compared to Rs607.5 billion in the same period last year.

Within private sector credit, loans to businesses rose to Rs749.4 billion, up from Rs706.6 billion last year, indicating increased financing activity in the business sector.

Demand for fixed investment loans also increased significantly, reaching Rs369.6 billion during the period, compared to Rs187.4 billion in the same period last year.

The rise in investment-related borrowing reflects increased demand for long-term financing, particularly for expansion and capacity-building purposes.

The data indicates that both liquidity conditions and credit flows improved during FY2026, supported by growth in money supply and increased borrowing by businesses.

Overall, the monetary indicators point to a more supportive financial environment, with stable policy rates, improved liquidity and higher private sector credit contributing to economic activity.

Credit: INP-WealthPk