PBA Backs Federal Budget 2025-26, Cites Growth, Stability

The Pakistan Banks Association (PBA) has conveyed its complete endorsement of the federal budget for 2025-26, hailing it as a substantial advancement towards broad-based expansion and fiscal soundness.

In a statement released on Wednesday, the PBA underscored that the banking industry, as a crucial ally in Pakistan’s economic progression, will continue its pivotal function in bolstering national objectives and pushing forward essential structural overhauls.

The sector, in close collaboration with the Ministry of Finance (MoF), the State Bank of Pakistan (SBP), and other relevant entities, and guided by the finance minister and the SBP governor, is “pleased to be a part of several groundbreaking initiatives featured in the federal budget.”

One notable accomplishment highlighted by the PBA is its contribution to finalizing the Rs1.275 trillion Circular Debt Resolution transaction—recognized as one of the most extensive and intricate financing endeavors in the nation’s history.

The association stated that it collaborated closely with the MoF, SBP, and the Central Power Purchasing Agency (CPPA) to tackle complex challenges and secure essential regulatory approvals.

“This cashflow-supported mechanism, designed to minimize additional strain on consumers, is poised to bring stability to the power sector and alleviate electricity expenses. Among the most pioneering elements of the budget is the introduction of the National Subsistence Farmers Support Initiative (NSFSI).”

The PBA noted that the initiative is geared towards empowering small-scale farmers through digital, cashflow-based loans, up to Rs1 million, directly dispensed via digital wallets and redeemable at POS-enabled merchants for vital agricultural resources.

“The program will also deliver tech-integrated agri-advisory services, alongside an Electronic Warehouse Receipt (eWhR) solution, to strengthen rural financial opportunities.”

According to the association, the SME sector has also experienced renewed vigor.

“The SBP-led SME Risk Coverage Scheme, which was launched last year, has already channeled more than Rs311 billion to over 95,000 businesses. Consequently, SME financing has grown by 36%, reaching PKR 641 billion, and the number of beneficiaries has risen by 51%. The scheme is setting the stage for the government to achieve its Rs1.1 trillion credit target for SMEs by 2028.

“Within the housing market, a government-backed subsidy scheme promoting affordable housing is being implemented to assist low- and middle-income purchasers. In partnership with banks, the scheme will provide 20-year mortgages at concessional rates, with the goal of elevating Pakistan’s mortgage-to-GDP ratio from its present 0.3% to 5% by the year 2030.”

In a move to encourage a more eco-friendly and inclusive transportation environment, the government, in partnership with the PBA, is rolling out a targeted financing scheme for electric two- and three-wheeled vehicles.

“This endeavor will offer subsidized loans with lighter collateral requirements to gig economy workers, women, and small business owners. The initiative is projected to curb carbon emissions and reduce urban contamination, while also generating cost savings for citizens amidst escalating fuel costs,” the PBA stated.

The banking sector, working with the British Asian Trust (BAT), is introducing Pakistan’s inaugural Pakistan Skills Impact Bond (PSIB).

“This creative funding approach transitions away from conventional target-oriented funding toward results-based financing, wherein success is evaluated through tangible employment outcomes.

“The PSIB, devised to address enduring inefficiencies within the technical and vocational education arena, is intended to draw in global outcome funders and CSR contributors to broaden its influence, signaling a transformative stride in results-oriented public finance.”

Zafar Masud, Chairman of the PBA, commented on these developments:

“These ambitious reforms and pinpointed interventions highlight the evolving function of the banking sector—shifting from merely serving as a financial conduit to becoming a strategic instigator of national advancement. As a pivotal facilitator, the PBA is continuing to take the lead—cultivating alliances between the public and private spheres, shaping progressive policy discussions, and supporting innovation that yields genuine results.”