Tuesday, November 29, 2022

Private sector borrowing surges 57pc in Jul-Jan

KARACHI: Bank lending to private sector surged 57.2 percent year-on-year to Rs234.7 billion during the first seven months of the current fiscal year of 2020/21 as businesses were gravitating toward low-cost borrowing amid economic recovery, the central bank’s data showed.

The State Bank of Pakistan’s (SBP) data showed the private sector borrowed Rs149.3 billion between July 1, 2019 to January 22, 2020.

Analysts said the uptick in the private sector credit is supported by a continued rise in consumer and fixed investment loans due to the SBP’s refinance facilities.

Working capital loans have also picked up for the first time since the start of the coronavirus pandemic, though their level remained lower than last year. This trend depicted demand recover and inventories decline in some sectors, they said.

The SBP slashed policy rate by 625 basis points to 7 percent last year. The back-to-back reduction in the interest rates was aimed at to support the lockdown-ravaged economy. The growth contracted to 0.4 percent, first time in many decades, during the last fiscal year.

The pace of economic recovery has strengthened in recent months. The growth is expected to be in the range of 1.5 to 2 percent during the current fiscal year.

Large-scale manufacturing grew by 7.4 percent year-on-year in October and 14.5 percent year-on-year in November, according to official numbers.

The economic reopening reflected positive impact on almost all sectors of the economy. Cement sales remained strong on the back of rising construction activity, and were up 140 percent year-on-year in January.

Oil sales rose 14 percent in January. Exports increased to $2.14 billion in January from $1.98 billion in the same month a year ago.

The SBP’s latest data showed that the policy easing measures and the roll out of the concessionary financing facilities by the SBP, such as long-term financing facility and the scheme introduced to mitigate the impact of lockdown has positive impact on credit growth.

Banks are providing financing at low rates for investment, and concessionary financing is seeing healthy pick-up as the economy showed signs of revival.

The amount requested under temporary economic refinance facility has increased from Rs36.1 billion at end-April 2020 to Rs649.2 billion as of January 21, with approved financing having reached to Rs323.3 billion from Rs0.5 billion during this period.

The central bank in the past had warned the government of extended lockdown, which it said would raise challenges of foods and security.

Source: The News

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