Credit off-take surges 107pc in nine months

KARACHI: Private sector credit off-take has registered phenomenal growth of 107 percent to Rs 370.78 billion during July – March 2015/2016 as compared with Rs178.46 billion in the corresponding period of the last fiscal year, according to statistics released by State Bank of Pakistan (SBP) on Tuesday.

The surge in lending to private sector has been mainly attributed to ease in government borrowing from commercial banks, multi-year low interest rate and prospects of uptake in developmental projects, mainly in energy sector.

The government borrowing for budget financing and repayment from scheduled banks came down by 10 percent to Rs1,118.73 billion during the period under review as compared with Rs1,241 billion in the corresponding period of the last fiscal year.

Analysts have attributed the ease in government borrowing to external inflows which helped in improving the repayment capacity and utilization for budget financing. The foreign exchange reserves of the country are at $20.88 billion by week ended April 01, 2016. The SBP attributed the increase in foreign exchange reserves to inflows from IMF, bilateral and multi-lateral financing to the country.

The SBP in the recent monetary policy announced on April 09, kept the policy rate unchanged at 6 percent, which is 42-year low and the central bank maintained it since September 2015 to create room for private sector participation in the economic growth. The central bank in its Monetary Policy Statement said: “With positive consumer sentiments and incremental lending rates at considerably lower levels, the uptake in credit to private sector is expected to end fiscal year 2015/2016 on a higher level than that of fiscal year 2014/2015.”

The total lending of commercial banks to the private sector was at Rs208.72 billion during fiscal year 2014/2015 and it was Rs371.37 billion in the preceding fiscal year.

The analysts said that the indicators had shown positive outcome in overall economic environment and it was due to improvement in law and order situation and investments prospects under China – Pakistan Economic Corridor (CPEC).

The central bank in its first quarterly review on state of Pakistan’s Economy noted that the government had estimated disbursements of Rs207 billion -around $2.1 billion - from China in the current fiscal year. The flow of such disbursement is likely to be in power and construction sectors, the SBP said.