The Punjab loan surge has turned heads across Pakistan’s financial landscape, as the province emerged as the biggest borrower among all provinces, securing a staggering Rs. 405 billion from the State Bank of Pakistan (SBP) in just the first 38 days of the current fiscal year (July 1 to August 8, 2025). This rapid escalation has put Punjab at the center of debates over provincial fiscal discipline, reliance on central bank financing, and long-term debt sustainability.
While the federal government is restricted by IMF conditions from borrowing directly from the SBP, provincial governments face no such restrictions. Punjab, under the leadership of Chief Minister Maryam Nawaz, has used this fiscal space aggressively, pushing its reliance on SBP financing to unprecedented levels.
Punjab Leads the Pack
Punjab’s borrowing dwarfs that of other provinces. According to SBP data:
- Punjab borrowed Rs. 405 billion
- Sindh borrowed Rs. 16 billion
- Khyber Pakhtunkhwa borrowed Rs. 21 billion
- Balochistan borrowed Rs. 13 billion
This means Punjab borrowed 25 times more than Balochistan and over 20 times more than Sindh in the same period. The Punjab loan surge underscores how sharply provincial borrowing trends can diverge, raising questions about fairness, sustainability, and fiscal management across the federation.
Clearing Old Debts
Amid this borrowing spree, Punjab officials made headlines with another major financial move: the repayment of Rs. 675 billion in long-standing bank debt. This debt had accumulated over more than three decades, mostly due to wheat procurement financing and subsidy programs.
By clearing it, Punjab ended the daily interest drain of Rs. 250 million that had been bleeding provincial resources for years. Officials hailed the move as a “historic step” that would free up funds for development and public welfare.
The final installment of Rs. 13.8 billion went to the National Bank of Pakistan. Importantly, the Punjab government rejected all requests to roll over the loans. Had the debt remained, officials estimated, the province would have been locked into paying Rs. 500 million per month in interest—money that could now be redirected toward education, healthcare, and infrastructure.
SOEs Still in Trouble
However, not all parts of Punjab’s financial ecosystem tell the same success story. State-Owned Enterprises (SOEs) continue to struggle. These entities, ranging from utilities to industrial operations, borrowed an additional Rs. 65 billion from commercial banks during the same period, just to cover operational losses.
This borrowing pushed the total outstanding SOE debt to Rs. 2,166 billion, underscoring the scale of inefficiency and mismanagement within public enterprises. Analysts warn that even as the provincial government makes progress on its own debt portfolio, unchecked SOE liabilities could undermine broader fiscal stability.
Federal vs Provincial Borrowing
In contrast to Punjab’s heavy reliance on SBP, the federal government showed relative restraint. Bound by IMF conditions that bar direct borrowing from the central bank, Islamabad instead focused on repayment. In the same 38-day window, the federal government repaid Rs. 55 billion, reducing its outstanding SBP debt to Rs. 5,269 billion as of June 30, 2025.
This difference highlights a widening gap between provincial borrowing behavior and federal fiscal commitments. While the center tightens its belt under international oversight, provinces—particularly Punjab—continue to tap central bank financing.
Implications of the Punjab Loan Surge
Economists warn that the Punjab loan surge has several far-reaching implications:
- SBP Dependence
Reliance on central bank financing can fuel inflationary pressures, especially if not matched by corresponding revenue generation. Punjab’s borrowing spree risks destabilizing monetary discipline. - Fiscal Disparity
Punjab’s borrowing is several times higher than that of other provinces, potentially upsetting the balance of fiscal responsibility under the National Finance Commission (NFC) award. - Debt Sustainability
Clearing the Rs. 675 billion bank debt is a positive step, but replacing it with fresh SBP borrowing could create a cycle of dependence that limits Punjab’s financial flexibility in the years ahead. - SOE Liabilities
With public enterprises amassing more than Rs. 2,166 billion in debt, structural reforms remain urgent. Without addressing SOE inefficiencies, fresh borrowing may only cover losses temporarily. - Political Economy
The Punjab government has pitched its debt repayment as a historic milestone. However, critics argue that the simultaneous borrowing surge undermines the credibility of these achievements.
What Lies Ahead?
The months ahead will test Punjab’s ability to balance its borrowing with sustainable fiscal policies. Key areas to watch include:
- Revenue Mobilization: Can Punjab strengthen tax collection to reduce its reliance on SBP loans?
- Public Spending Efficiency: Will the funds freed from interest payments be directed toward productive development projects?
- SOE Reforms: Can the government tackle the chronic inefficiencies of loss-making enterprises?
- Federal-Provincial Coordination: Will Islamabad and Punjab align their strategies to maintain macroeconomic stability under IMF oversight?
Conclusion
The Punjab loan surge of Rs. 405 billion in just 38 days has placed the province under intense scrutiny. While paying off Rs. 675 billion in historic debt is a major achievement, Punjab’s growing reliance on SBP borrowing, coupled with the ballooning liabilities of SOEs, raises critical questions about long-term sustainability.
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As Pakistan navigates IMF commitments, inflationary pressures, and uneven provincial borrowing trends, Punjab’s fiscal strategy will remain a defining factor in the country’s broader economic outlook.
