Pakistan’s monetary and credit indicators showed significant improvement during FY2026, reflecting the continued normalization of the country’s macroeconomic conditions amid stronger external buffers, easing inflation, and a prudent monetary policy stance.
According to the Economic Survey 2025-26, unveiled by Federal Finance Minister Senator Muhammad Aurangzeb on Thursday, broad money (M2) growth accelerated to 15.4 percent year-on-year by the end of March FY2026, compared to 13.0 percent during the corresponding period last year.
The survey noted that the expansion in M2 was supported by growth in both Net Foreign Assets (NFA) and Net Domestic Assets (NDA) of the banking system.
During July-March FY2026, the banking system’s NFA increased by Rs 816.7 billion, reflecting improved foreign exchange reserves and greater stability in the external sector. Although positive, the increase was lower than the Rs 1,162.7 billion recorded during the same period last year.
Meanwhile, NDA expanded by Rs 1,924 billion, a substantial increase compared to Rs 441.4 billion in the corresponding period of FY2025. The survey attributed this growth to improved domestic liquidity conditions and a gradual recovery in economic activity.
Government borrowing for budgetary support moderated significantly during the period, standing at Rs 850.6 billion, compared to Rs 1,320.9 billion a year earlier. The reduction in fiscal borrowing, coupled with monetary easing undertaken earlier, helped strengthen market liquidity, improve business confidence, and create space for greater private-sector credit uptake.
Private sector borrowing rose markedly, reaching Rs 934.1 billion during July-March FY2026, compared to Rs 767.6 billion in the same period last year.
The increase was primarily driven by growing demand for working capital and fixed investment financing.The survey emphasized that sustained growth in productive private-sector credit could boost investment, expand industrial capacity, and support a more durable economic recovery.
On a cumulative basis, broad money (M2) grew by 6.8 percent (Rs 2,740.6 billion) during July-March FY2026, compared to 4.5 percent (Rs 1,604.1 billion) in the corresponding period of the previous fiscal year.
The Economic Survey highlighted that a prudent and calibrated monetary policy remained instrumental in anchoring inflation expectations, sustaining economic recovery, and maintaining financial and external sector stability throughout FY2026.
Analysts view the combination of lower government borrowing, stronger banking sector liquidity, improving external accounts, and rising private-sector credit demand as encouraging signs that Pakistan’s economy is gradually moving towards a more sustainable growth trajectory.