KARACHI:
Credit to the private sector remained in the negative territory in the first quarter of 2014-15, as the country’s private businesses returned a net amount of Rs3.7 billion until September 26.
The private sector had retired Rs18.8 billion in the comparable three-month period of the preceding fiscal year, according to the latest monetary aggregates released by the State Bank of Pakistan (SBP).
The drop in private-sector credit off-take in July-September follows a historic increase in loans extended to private businesses during 2013-14 when it touched a six-year high of Rs383.9 billion. In 2012-13, however, private-sector credit had amounted to a negative Rs19 billion.
Growth in the private sector’s outstanding credit at the end of August was the highest in the electricity, gas and water supply category. Its outstanding credit at the end of the second month of 2014-15 was Rs278.18 billion, which was 14.7% up compared with the corresponding figure at the end of August 2013.
The year-on-year increase in outstanding loans in the agriculture, hunting and forestry category was 14% at the end of August while the rise in outstanding credit to the manufacturing sector clocked up at 14.3%. Outstanding loans owed by businesses in the commerce and trade category increased 8.4% year-on-year to reach Rs214.3 billion by the end of August.
Private-sector credit is a key indicator of economic growth and reflects investors’ confidence in the economy’s future prospects. Increased private-sector credit helps the gross domestic product expand, as businesses use bank loans to meet their working capital needs and make long-term investments.
Money supply in the economy shrank by 1.52% during the first three months of 2014-15 in contrast with the contraction of 0.65% recorded in the comparable period of 2013-14.
The contraction in broad money between July 1 and September 26 remained Rs151 billion, which is significantly greater than the negative monetary impact of Rs57.6 billion recorded over the corresponding period of the last fiscal year.
Data shows the currency in circulation has increased by Rs84.49 billion since the start of the current fiscal year. The increase in the currency in circulation during the same period of the last fiscal year was Rs68 billion.
Total currency in circulation on September 26 stood at Rs2.26 trillion, SBP monetary aggregates show.
The contraction in money supply seems to be a result of a major decline in net federal government borrowings from the central bank for budgetary support. They amounted to only Rs14.96 billion in July-September, as opposed to Rs513.48 billion during the first three months of the last fiscal year. This translates into a year-on-year decline of 97% in net borrowings from the SBP between July 1 and September 26.
Net federal government borrowings from scheduled banks in July-September remained Rs85.29 billion. They were in the negative zone during the same period of 2013-14, with the government retiring Rs179.72 billion during July-September.
Published in The Express Tribune, October 9th, 2014.
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The decrease in credit off-take is the result of chaos created by Imran-ul-Qadri since mid August 2014. These two idiots are destroying the economy and blocked Chinese Investment from coming to Pakistan. They should be tried under article6 for harming Pakistan's interest.
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