SBP profit drops to Rs1,990bn as interest rates fall
The State Bank of Pakistan reported a net profit of Rs1,990bn during the financial year. After required accounting adjustments and statutory appropriations, Rs1,932bn was transferred to the government.
The transfer remains an important source of non-tax revenue for the federal government. It can help reduce pressure on domestic borrowing and support efforts to manage the fiscal deficit.
The latest figures also show how changes in interest rates can affect the central bank’s earnings. As monetary policy became less restrictive, the SBP’s profitability started moving down from earlier record levels.
Lower interest rates affect SBP earnings
Pakistan’s benchmark interest rate had reached 22pc during the previous period of tight monetary policy. It was later reduced gradually and stood at 11.5pc, bringing some relief to borrowers but also affecting the central bank’s income.
The decline in SBP profit is notable when compared with the previous financial year. In FY25, the central bank earned around Rs2.5 trillion, meaning its FY26 profit was considerably lower.
The SBP said in its Annual Financial Statements that its FY26 net profit was Rs1,990bn. After the required appropriations, the remaining surplus of Rs1,932bn was remitted to the federal government.
“During the year, the SBP earned a net profit of Rs1,990bn. After accounting for appropriations as required under the accounting framework and statutory requirements, the surplus profit of Rs1,932bn has been remitted to the federal government,” the central bank said.
The government has received large transfers from the SBP during the past several years. These payments have become an important part of federal non-tax revenue.
Why SBP transfers matter for the government
The government regularly faces a gap between its tax collection and the revenue targets included in the national budget. Income from the central bank can help cover part of that shortfall.
Unlike taxes that form part of the divisible pool shared with provinces, federal non-tax revenue remains with the federal government. This makes SBP profits particularly important for managing federal finances.
The government has also used additional liquidity to adjust the structure of its domestic borrowing. Data from the central bank indicate that borrowing through longer-term Pakistan Investment Bonds has increased, while reliance on short-term Market Treasury Bills has declined.
This shift can give the government a longer repayment period. However, it does not remove the broader challenge of managing the country’s large domestic debt.
The government’s domestic debt reached Rs59.94tr by the end of FY26. The amount increased by around 9pc, or approximately Rs4.969tr, during the year.
The figures highlight the continued pressure on public finances despite the large income received from the central bank. SBP transfers can provide temporary fiscal support, but they do not replace stronger tax collection and better control of government spending.
Inflation pressures remain a concern
The reduction in interest rates has taken place alongside changing inflationary conditions. The easing of monetary policy was intended to support economic activity as inflation pressures declined.
However, higher energy prices linked to tensions in the Middle East have created fresh concerns about inflation. A renewed rise in prices could make future monetary policy decisions more difficult.
For businesses and consumers, lower interest rates can reduce borrowing costs and support investment. At the same time, the central bank has to carefully balance economic growth with price stability.
The latest SBP profit figures therefore provide a broader picture of the effects of monetary policy. The central bank earns income through its operations, and changes in financial conditions can directly affect the amount eventually transferred to the government.
Also Read:Pakistan cuts petrol, diesel prices, new rates take effect today
Foreign exchange reserves remain above $22bn
The SBP also reported that Pakistan’s total liquid foreign exchange reserves stood at $22.587bn during the week ending August 21.
The central bank’s own foreign exchange reserves increased by $17m to $17.098bn. Commercial banks held another $5.488bn, bringing the combined reserves to the reported total.
Foreign exchange reserves are closely watched because they indicate the country’s ability to meet external payment obligations. Stronger reserves can also provide greater confidence in the country’s external financial position.
The latest increase in SBP reserves came as the central bank continued managing the country’s foreign exchange position. However, reserve levels can change because of debt repayments, imports, exports, remittances and other external transactions.
For Pakistan, maintaining adequate reserves remains important because the country has significant external financing requirements. Stable reserves can help reduce pressure on the exchange rate and improve the ability to meet international payments.
