Domestic Debt

Pakistan's federal government relies heavily on commercial banks for domestic debt, with banks holding 79% of marketable instruments worth Rs46.6 trillion. This concentration harms credit activity, with banks' advances-to-deposits ratio below 40% and SME loans at 10% of private-sector loans. A shift to retail investors could save Rs80 billion annually by reducing borrowing costs.

A major Japanese life insurance company is reducing its purchases of domestic debt, signaling a potential shift in investment strategy. This move may impact the Japanese debt market and reflect broader economic considerations.