Pakistan’s Banks Reap Profits Amid Government Debt Surge

• Pakistan's banks have seen significant profits due to high interest rates and government debt, with seven of the top 15 banks in Asia-Pacific by returns being Pakistani.
• The banking sector's after-tax profit nearly doubled to Rs642.2bn in 2023, despite the country's economic contraction and high inflation.
• Government debt has ballooned, with domestic debt reaching over Rs43tn by March 2024, leading banks to heavily invest in government securities.
• The financial sector has driven a stock market boom, but high government borrowing limits private sector lending, which is among the lowest globally.
• Despite high profits, banks face risks of default and restructuring, and the government is increasing taxes on bank profits to manage the economic crisis.

Source: Financial Times