Deposit growth slows down, SBP data shows

Attributed to SBP’s commitment to slowing growth in domestic money supply.

KARACHI:

Tighter money supply has led to a slowdown in growth of deposits, data released by the State Bank of Pakistan (SBP) shows.

Growth in deposits has slowed down slightly from 14% year-on-year in December 2013, as the SBP has committed to reducing growth in domestic money supply under the International Monetary Fund (IMF) agreement, according to analysts.

Money supply increased 5.36% between July 1, 2013, and April 25. In contrast, the increase in money supply during the comparable period of the preceding fiscal year was 8.55%.

Pakistan fares rather poorly in terms of deposits’ share in the gross domestic product (GDP). Their ratio in GDP is only 33%, one of the lowest in the entire region. The average deposits-to-GDP ratio for South Asia is around 54%.

The provisional figure for total deposits at the end of March was Rs7.49 trillion, up 12.7% from one year ago. Interestingly, personal deposits constituted almost half of the total deposits in the country.

Personal deposits amounted to Rs3.69 trillion, or 49.3% of total deposits, at the end of March, shows the latest set of data on banking deposits.

Speaking to The Express Tribune, Economist Sayem Ali said the high proportion of personal deposits in Pakistan is reflective of its financial markets’ early stage of development. “For a developing economy with limited depth and products, the bulk of deposit base consists of individual savers,” he noted.

The SBP categorises personal deposits in three categories: salaried people, self-employed people and ‘Other personal (housewives, students)’. Within the personal deposits segment, the largest chunk belongs to self-employed individuals (48.1%). Deposits of salaried people constitute 20.9% of total personal deposits while the ‘other personal’ category has a share of 30.9%.

With reference to a significantly high proportion of deposits of housewives and students in total deposits, Ali says his assumption is that many people keep money with their dependents (family members) in order to save on tax liabilities.

Year-on-year growth in the deposits placed under the category of ‘Other personal’ remained 13.2% at the end of March as opposed to the increase of 8.5% under the category of self-employed people. Growth in the deposits of salaried people during the 12-month period clocked up at 17.4%.

Private-sector businesses that had deposits of more than Rs100 billion at the end of March included real estate, renting and business activities (Rs271 billion), agriculture (Rs215.9 billion), transport, storage and communications (Rs180.6 billion), retail trade (Rs155.3 billion), wholesale and commission trade (Rs148.6 billion), and building and construction (Rs100.5 billion).

Published in The Express Tribune, May 13^th, 2014.

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