Pakistani banks lead the world—in lending to government
Pakistan’s banks are setting global records, just not the kind we want. Government bonds and loans comprise 60 percent of our banking sector’s assets, the highest of any country in the world.
In emerging markets, the average is just 20 percent, meaning Pakistani banks hold three times more government debt than their developing country peers. The flip side of that equation is that credit extended by Pakistani banks to the private sector is also the lowest among emerging economies — standing at 8.4 percent of GDP in 2024.
The picture is even bleaker for small and medium-sized enterprises (SMEs), which receive just five percent of total private sector credit — despite making up 90 percent of all businesses, employing 80 percent of the non-agriculture workforce and contributing 40 percent to GDP.
So, how did we get to a point where nine out of 10 businesses in Pakistan have little hope of financing their future?
My latest in Dawn: Bonds over Businesses