Pakistan’s government cut its debt by Rs194.1 billion in the week ending January 2, according to fresh figures released by the State Bank of Pakistan. The move has pushed total net debt retirement for the current fiscal year to Rs401.05bn, offering some relief to a strained public balance sheet.
The central bank’s weekly estimates show that government borrowing is grouped into three main areas. These include loans taken for budget needs, financing of commodity operations, and a smaller category listed as others.
Most of the reduction during the reported week came from budgetary support. The government retired Rs196.51bn under this head. At the same time, it borrowed Rs2.54bn for commodity operations, which mainly cover items such as wheat and other key supplies. A further Rs131m was paid off in the other category.
Taken together, these movements have shaped the borrowing picture for the fiscal year so far. Since the start of FY2026, the government has retired Rs421.7bn in budgetary support. Borrowing for commodity operations now stands at Rs22.36bn, while Rs1.7bn has been retired from other loans.
State Bank and banks play key role
The State Bank of Pakistan and scheduled banks remain the two main sources of financing for the government’s budget needs. Data shows a sharp shift in how the government has managed this funding during the year.
So far in FY2026, the government has repaid a net Rs1.42 trillion to the central bank. This includes a repayment of Rs1.59 trillion by the federal government. In contrast, provincial governments borrowed Rs219.41bn during the same period. The governments of Azad Jammu and Kashmir and Gilgit Baltistan also reduced their liabilities, retiring Rs25.11bn and Rs20.43bn respectively.
At the same time, the government has borrowed heavily from scheduled banks. Net lending from these banks has reached Rs997.65bn. The federal government alone borrowed Rs1.19tr, while provincial governments paid back Rs194.87bn to banks.
Money supply continues to grow
Alongside changes in government borrowing, the money supply in Pakistan has continued to expand. Broad money, known as M2, rose by Rs345.76bn in one week to reach Rs41.63tr as of January 02, 2026.
Compared with the end of June 2025, M2 has increased by Rs838.38bn. At that time, it stood at Rs40.79tr.
Currency in circulation fell slightly during the week. Notes and coins held by the public and financial institutions dropped by Rs27.35bn to Rs10.92tr. Despite this weekly fall, currency in circulation has risen by Rs282.59bn since the start of the fiscal year.
Currency made up 26.23 percent of total M2, down from 26.51 percent a week earlier.
Bank deposits, however, showed a strong rise. Total deposits reached Rs30.66tr, up by Rs367.45bn over the week and Rs563.73bn since June. These figures do not include inter bank deposits, government funds, or foreign deposits.
In Pakistan, M2 remains the main measure used to track money supply. It reflects both the liabilities and assets of the banking system, offering a broad view of financial conditions in the country.
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