Private sector borrowings swell 22.9pc to Rs7.854tr in April

KARACHI: The private sector credit off-take jumped 22.9 percent year-on-year to Rs7.854 trillion in April on strong demand for working capital loans, the State Bank of Pakistan (SBP) showed on Friday.

The private businesses took Rs6.757 trillion loans at the end of April, up 22.3 percent from a year earlier.

Analysts said an increase economic activity in the country boosted private sector credit.

“The industrial output is rising due to surging global demand, easy credits, and to some extent subsidised and smooth energy supplies to industry,’ an analyst said.

The large-scale manufacturing grew 26.6 percent year-on-year in March. Industrial production output not only rebounded but also posted the highest growth in the last month of the previous government. Industrial output increased by 8.2 percent in January, and further inched up in the following month.

The higher input prices also raised the demand for the working capital loans from the businesses. Besides, the refinancing schemes introduced by the SBP supported an increase in the bank lending for the private borrowers.

Housing finance and auto finance also helped rise in bank loans.

Loans to the manufacturing sector rose to Rs4.384 trillion in April from Rs3.432 trillion in the same period a year earlier.

Textile firms took Rs1.477 trillion loans from banks, compared with Rs1.125 trillion last year.

Banks extended Rs1.068 trillion credit to the food manufacturers in April, compared with the loans of Rs887.6 billion a year ago. Auto financing rose 25 percent to Rs367 billion as of April.

Analysts said the surging borrowing costs raised the risk of falling credit growth and slowing economy.

The Karachi Interbank offered rate continued going up, making loans more expensive. “This will reduce demand for bank credit especially in case of consumer loans, and loans to small and medium businesses,” another analyst said.

“A slowdown in private sector lending could impact economic activity.”

The rating agency Moody’s maintained its B3 stable outlook for Pakistan’s banking sector supported by an expanding economy and sound finances held by banks.

“We continue to maintain a stable outlook for the banking sector in Pakistan (B3 stable).

This balances good economic momentum and growing financial inclusion that are boosting lending opportunities, against political uncertainty in Pakistan and higher inflationary pressures due to the Russia-Ukraine military conflict,” the agency said in its outlook last month.