ISLAMABAD: In a major relief for provincial governments, public sector entities and government employees, the federal government has sharply reduced the mark-up rate on development loans and advances for fiscal year 2025-26 to 11.89 percent, down from 17.74 percent in the previous fiscal year.
According to an official notification issued by the Ministry of Finance on Friday, the final rate of mark-up chargeable on cash development loans to provincial governments, loans extended to local bodies, financial and non-financial institutions, other corporations, as well as capital outlays of the federal government in commercial departments, has been fixed at 11.89 percent per annum for fiscal year 2025-26.
The new rate marks a decline of 5.85 percentage points from the 17.74 percent applicable during fiscal year 2024-25 and is significantly lower than the 17.84 percent charged in fiscal year 2023-24.
The Finance Ministry conveyed the decision through an official communication addressed to the Controller General of Accounts (CGA), Islamabad. The revised mark-up rate will apply to three major categories: Cash development loans to provincial governments; Loans to local bodies, financial and non-financial institutions, and other corporations; and Capital outlays of the federal government in commercial departments.
The ministry also announced that the same 11.89 percent annual mark-up rate will apply to government advances for the purchase of conveyance and house building during fiscal year 2025-26.
The lower mark-up is expected to reduce the debt-servicing burden on provincial governments and public sector organizations that rely on federal development financing. It is also likely to lower the financing cost for government employees availing house-building and vehicle purchase advances.
Copyright Business Recorder, 2026
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