Pakistan banking sector backs federal budget for FY2025-26
In a press release issued on Wednesday, the PBA emphasised that the banking sector, as a key partner in Pakistan's economic development, continues to play a vital role in supporting national priorities and advancing structural reforms.
In close coordination with the Ministry of Finance (MoF), the State Bank of Pakistan (SBP), and other stakeholders, and under the leadership of the finance minister and the SBP governor, the sector is 'proud to contribute to a series of transformative initiatives introduced in the federal budget'.
Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals 'for a competitive economy'
An achievement cited by the PBA is its role in concluding the Rs1.275 trillion Circular Debt Resolution transaction—one of the largest and most complex financing efforts in the country's history.
The association said it worked closely with the MoF, SBP, and the Central Power Purchasing Agency (CPPA) to resolve intricate issues and secure vital regulatory concessions.
'This cashflow-backed solution, with minimal additional burden on consumers, is expected to stabilise the power sector and help reduce electricity costs. One of the most forward-looking measures in the budget is the launch of the National Subsistence Farmers Support Initiative (NSFSI).'
The PBA said the initiative aims to empower smallholder farmers through digital, cashflow-based loans of up to Rs1 million, directly disbursed to digital wallets and redeemable at POS-enabled merchants for essential agricultural inputs.
'The programme also provides tech-enabled agri-advisory services, complemented by an Electronic Warehouse Receipt (eWhR) solution to enhance rural financing.'
The SME sector has also gained fresh momentum, according to the association.
'The SBP-led SME Risk Coverage Scheme, introduced last year, has already disbursed over Rs311 billion to more than 95,000 businesses. As a result, SME financing has increased by 36% to PKR 641 billion, with a 51% rise in the number of beneficiaries. The scheme puts the government on track to meet its Rs1.1 trillion credit target for SMEs by 2028.
'In the housing sector, a government-backed subsidy scheme for affordable housing is being rolled out to support low- and middle-income buyers. In partnership with banks, the scheme will offer 20-year mortgages at subsidised rates, aiming to increase Pakistan's mortgage-to-GDP ratio from the current 0.3% to 5% by 2030.'
To promote a greener and more inclusive mobility ecosystem, the government, in collaboration with PBA, is launching a targeted financing scheme for electric two- and three-wheelers.
'This initiative will provide subsidised, collateral-light loans to gig workers, women, and small business owners. It is expected to reduce carbon emissions and urban pollution while offering cost savings for citizens amid rising fuel prices,' the PBA said.
Pakistan's banking sector, in collaboration with the British Asian Trust (BAT), is launching the country's first-ever Pakistan Skills Impact Bond (PSIB), the press release read.
'This innovative financing model shifts from traditional target-based funding to outcome-based financing, where success is measured by real employment outcomes.
Key highlights of Pakistan budget for 2025-26
'Designed to address long-standing inefficiencies in the technical and vocational education sector, the PSIB aims to attract global outcome funders and CSR contributors to scale its impact—marking a transformative step in results-driven public finance.'
Commenting on these developments, Zafar Masud, Chairman PBA, said: 'These bold reforms and targeted interventions underscore the evolving role of the banking industry—not merely as a financial intermediary but as a strategic driver of national transformation. As a key enabler, the PBA continues to lead from the front—fostering collaboration between the public and private sectors, shaping progressive policy dialogue, and championing innovation that delivers real impact'.
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