Private sector’s credit stands at Rs4.683 trillion in July

KARACHI: Net private sector’s credit rose 19.3 percent year-on-year to Rs4.683 trillion in the first month of the current fiscal year as appetite of businesses for bank loans continued to increase in July on growing demand of funds mainly in manufacturing sector. 

The State Bank of Pakistan’s (SBP) data revealed on Tuesday that private sector’s outstanding credit amounted to Rs3.922 trillion in the same month of the last fiscal year.  The credit to private sector, however, stood at Rs4.754 trillion in June 2017.  

The decades-low interest rate is encouraging private sector to borrow inexpensive funds from banks, which are also turning less risk-aversive to businesses.    In July, half of the private sector’s credit was accumulated in manufacturing sector. Outstanding position of manufacturing sector amounted to Rs2.236 trillion at the end of July as compared to Rs1.839 trillion in the same month a year earlier, up around 22 percent.

The sector’s outstanding position of loans stood at Rs2.299 trillion in June 2017.  Large scale manufacturing (LSM) sector, accounting for 80 percent of the industrial sector’s 10 percent contribution to GDP, posted a four-year high growth of 5.6 percent during the last fiscal year of 2016/17 as a massive development spending to fill infrastructure gap and a boom in construction boosted demand of iron and steel products.   

LSM recorded 3.13 percent growth in FY2016, 3.38 percent in FY2015, 5.39 percent in FY2014 and 4.28 percent in FY2013, said Pakistan Bureau of Statistics. The government set the sector’s target at 5.7 percent for FY2018.

SBP data showed that banks’ investment in securities and shares of private sector stood at Rs270.730 billion as of July-end compared with Rs255.888 billion a year ago and Rs264.563 billion in June 2017. 

Private sector’s loans, however, amounted to Rs4.412 trillion in July as compared to Rs3.666 trillion in the same month a year earlier.  In manufacturing sector, the biggest borrower was the textile industry, comprising of spinning, weaving, apparel and garments manufacturing subsectors.

 The outstanding position of textile sector’s loan stood at Rs678.402 billion in July, depicting a jump of around 16 percent from Rs585.224 billion in the same month a year ago. In June 2017, the total loan amount issued to textile sector was recorded at Rs695.106 billion. 

The second largest borrower in manufacturing sector was from food and beverages businesses with outstanding loan position of Rs612.655 billion in July, up a staggering 35 percent from Rs452.618 billion in the similar month a year earlier. In June, the loan amount stood at Rs627.642 billion. 

The third major borrower was from electricity, gas and water supply sector with outstanding loan position of Rs369.502 billion in July as compared to Rs308.707 billion in July 2016 and Rs368.679 billion in June 2017. 

SBP data further showed that banks’ net credit to government sector stood at Rs6.563 trillion in July as against Rs5.997 trillion in the same month a year ago and Rs6.790 trillion in June 2017. This was in addition to SBP’s credit to government sector, standing at Rs2.630 trillion as of June-end.