ISLAMABAD (Eshfak Mughal):- The bank borrowing of private sector was reduced by Rs340 billion (33 percent) to Rs.703 billion from Rs.1043 billion due to slow down in economy and increase in policy rate to 16 percent during the first half of the current fiscal year.
The State Bank of Pakistan (SBP) has compiled a report about the private sector credit during the first half of the current fiscal year.
The data shows that the credit of private sector has reduced during the first half of the current fiscal year. According to the report, the private sector has taken Rs.703 billion during the first six months of the current fiscal year as compared to Rs.1043 billion in the same period of the last fiscal year. After the credit, the total debt stock of private sector from banking sector was mounted to Rs.9.24 trillion up to 30th Dec 2022.
The private sector has obtained Rs.705 billion fresh loan from conventional Banking branches during the first half of the current fiscal year as compared to Rs735 billion during the same period of the last fiscal year. After the fresh loan, the credit of private sector from conventional banking branches has been swelled to Rs736 billion during the period.
It has borrowed Rs.75 billion fresh credit from Islamic during the first half of the current fiscal year as compared to Rs.124 billion during the same period of the last fiscal year. The total debt stock of the private sector of Islamic banks rose to Rs.1345 billion on 30th Dec 2022.
The private sector has retired loan worth of Rs.77.54 billion to Islamic Banking Branches of Conventional Banks during the first half of the current fiscal year, however, it had availed Rs183 billion loans from the same during the first half of the last fiscal year. After the repayment of Rs77.54 billion, the debt stock of the same reduced to Rs.1237 billion up to 30th Dec 2022 from Rs1314 billion by end of June 2022.
The slow speed of the private sector is indicating that the slowdown in economy is witnessed during the current fiscal year due to many factors including the stabilization program of the International Monetary Fund (IMF) and significant increase in policy rate which has been increased to Rs17 percent.
The Govt has increased policy rate to 17 percent which is the highest level to curtail the demand side which is bring inflation at the highest level of around 25 percent in the country.
Some economic experts say tha t the government could not control inflation through policy rate because currency devaluation and significant increase in prices at international market are main contributors to fuel the inflation speed instead of demand and supply issue.
They also says that 17 percent policy rate is the highest in region including India, China, Bangladesh and Sri Lank.
Currently, China kept policy rate at 2.75 percent, India has 6.25 percent, Bangladesh 5.75 percent, Sri Lanka 14.5, and Nepal has 8.5 percent.