“The momentum in private sector borrowing is real, buoyed by market participants anticipating that the average cost of borrowing in the coming calendar year will drop materially, allowing leveraged investment and expansion to resume.”(published by BR Research on 24 Dec 2024)
That was this section’s assessment last December, written when private sector credit had finally begun to move after more than two years of paralysis. Looking at the data now, one might be tempted to assume that judgment aged poorly.
Between August and December 2024, private sector credit ballooned by Rs 2.3 trillion, or about 31 percent, driven by the spectacular ADR tax–induced lending spree. By March 2025, the illusion cleared when roughly Rs 1.1 trillion of that liquidity had already been retired as banks unwound ADR-motivated loans.
Of the Rs 2.3 trillion injected, about 80 percent, or Rs 1.7 trillion, went into PKR-denominated working capital lines. This section had argued at the time that the remaining half-trillion represented real credit growth, split roughly between trade finance loans (mostly export-linked) and long-term borrowing for capital expenditure and BMR.
But that optimism has since met a cold reality. Trade finance borrowing, which rose by nearly Rs 250 billion between August and December 2024, has flatlined ever since. PKR working capital lines, meanwhile, have been in net retirement from March to August 2025, signaling a steady drip of liquidity exiting the system.
The real curiosity lies in long-term lending. Recall that nearly half of the “genuine” growth identified last year came from long-term loans, which had surged by ~Rs 240 billion in that same window. Against expectations, long-term lending has not only sustained its pace but accelerated, rising by another Rs 150 billion on a net basis this year, despite Rs 75 billion in settlement of legacy TERF and LTFF facilities. On balance, commercial long-term lending is up nearly Rs 200 billion in the first eight months of 2025, spread evenly across real sectors.
That raises a question: with double-digit interest rates and widespread corporate complaints about high borrowing costs, why is capex still expanding while inventory finance and working capital remain frozen?
BR Research stands by its earlier claim that private sector lending is back and that the growth spurt is only just starting to reveal itself. The March to September period historically marks a seasonal lull for working capital cycles. Since private credit is heavily concentrated in agro-processing, including textile, rice, and sugar, borrowing typically peaks in the last and first quarters when mills begin stocking cotton, paddy, and cane.
That cycle is only now beginning. If positive real rates have truly reshaped corporate borrowing behavior, the year-end surge will fail to materialize. If not, working capital borrowing will soon follow the same growth path already visible in capex lending.
It is that time of year again. Whether the sharp policy rate cut from 22 to 11 percent filters into the real economy or not, the next few months will reveal whether Pakistan’s credit revival is structural or merely seasonal noise.
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