The State Bank of Pakistan (SBP) ended fiscal year 2025-26 with a substantial but lower profit, as falling earnings from its financial assets weighed on its overall income.
The central bank reported a net profit of Rs1.99 trillion for FY26, down from Rs2.499 trillion a year earlier. The decline of roughly Rs506 billion represents a year-on-year drop of about 20%.
Financial Asset Income Takes a Hit
The main factor behind the weaker result was a sharp reduction in income generated from the SBP’s financial assets.
Income earned through discount, interest, mark-up and profit on financial assets fell to Rs2.037 trillion in FY26. In FY25, the corresponding figure was significantly higher at Rs2.801 trillion.
The difference of around Rs764 billion reflects the changing interest-rate environment in Pakistan.
The country has moved from a period of tight monetary policy toward lower interest rates. The policy rate, which previously stood at a record-high 22%, has gradually been brought down to 11.5%. Lower rates can reduce the returns earned by the central bank on certain financial assets.
Government Receives Nearly Rs2 Trillion
Despite the fall in profitability, the SBP continued to make a sizeable contribution to the federal government’s finances.
Following the required statutory and accounting adjustments, the central bank transferred Rs1.932 trillion from its surplus profit to the federal government.
These transfers are an important component of Pakistan’s non-tax revenue. They provide the government with additional funds and can help reduce its dependence on fresh borrowing from the domestic market.
Over the past several years, the SBP has transferred large amounts of its surplus earnings to the government, providing support at a time when fiscal pressures have remained high.
Changing Pattern of Domestic Borrowing
SBP-generated liquidity has also played a role in the government’s debt management operations.
Some short-term domestic liabilities have been retired, while borrowing has increasingly shifted toward longer-term instruments, particularly Pakistan Investment Bonds (PIBs).
Meanwhile, the government’s exposure to short-term Market Treasury Bills has decreased.
This change in borrowing composition can help spread repayment obligations over a longer period, although the overall size of domestic debt remains a major fiscal concern.
Printing Expenses Increase
Another notable development in the SBP’s FY26 financial results was the increase in expenditure on printing banknotes and prize bonds.
Printing-related charges climbed to Rs29.1 billion, compared with Rs24.667 billion in FY25. The increase amounted to approximately Rs4.433 billion, equivalent to about 18%.
The cost of printing banknotes is paid to Pakistan Security Printing Corporation (Private) Limited, which operates as a wholly owned subsidiary of the central bank.
Pakistan’s Domestic Debt Reaches Rs59.94 Trillion
The SBP’s lower profit also comes as Pakistan’s domestic debt continues to expand.
By the end of FY26, domestic debt had reached approximately Rs59.94 trillion, registering an increase of nearly Rs4.969 trillion, or around 9%, over the course of the year.
The figures demonstrate the continuing financing burden faced by the government and the importance of maintaining control over borrowing costs and debt accumulation.
Lower Profit, But Still a Major Revenue Source
The decline in SBP earnings does not diminish the central bank’s importance to the government’s finances. A profit of almost Rs2 trillion remains substantial, and the Rs1.932 trillion transfer provides considerable support to the federal budget.
However, the sharp fall in income from financial assets illustrates the impact of lower interest rates on the SBP’s profitability.
Going forward, the central bank’s earnings will continue to be influenced by interest rates, returns on its financial assets and broader monetary conditions. At the same time, the government will need to balance its reliance on SBP surplus transfers with efforts to strengthen tax revenues and manage the country’s growing debt burden.
The SBP’s financial statements for FY26, along with the auditors’ report, were submitted to the federal government and Parliament as required under the State Bank of Pakistan Act, 1956.