ISLAMABAD, Pakistan: The latest trend of rising volume of commercial lending to the private sector coupled with better energy supply and rising foreign direct investment (FDI) inflows shows significant uptick in economy in fiscal year (FY-2017).
According to Khaleej Times, commercial banks’ lending to the private sector rose by Rs352.3 billion so far in FY-16 as compared to Rs 222.3 billion in the same period of FY-15, the latest statistics by Stat Bank of Pakistan (SBP) showed.
“A significant part of this credit was availed by the private sector businesses. There was a high credit off-take in December 2015 which was enough to compensate for the lower cumulative flow during the earlier months of FY-16,” the SBP said.
The demand for the private sector credit was high due to lower cost of credit and better market conditions. The cost of borrowing declined to six per cent-an all time low in last 12 years – as a result of SBP’s easy money policy.
It added that at the same time, there was a “high deposit growth, and a lower government budgetary borrowing,” which created a surplus with the banks that was lent to the private sector. “The improvement in credit to the private sector over the previous year, primarily, was due to larger borrowing by the manufacturing sector, followed by commerce and trade, construction and electricity.”
One of the reasons for larger lending to the private sector was that government borrowing to cover its big budgetary deficit was lower than last year. In fact, government was funding its requirements by launching its longer-term investment bonds, rather than short-term and more expensive borrowing from the commercial banks which also had squeezed the bank credit for the private sector.
Another key factor for a potentially good omen for the economy to grow faster is expansion of the large-scale manufacturing (LSM) sector. Its output growth rose 4.35 per cent year-on-year in the first eight months July-February of FY-16.
In February, 2016 alone the LSM sector growth was 2.83 per cent higher as compared to the like month of FY-15, according to the SBP report.
The key sub-sectors which contributed to the LSM growth in the first eight months of FY-16 were: automobiles 27.67 per cent, fertiliser 16.95 per cent, chemicals 11.26 per cent, leather products 11.51 per cent, rubber products 11.64 per cent, and non-metallic mineral products 8.61 per cent.
In the same period, iron and steel sector produced 19.76 per cent more billets and ingots. The capacity of the sector also expanded in this period in order to feed lager exports.
The automobiles sector expanded as production of trucks rose 44.23 per cent, buses 77.54 per cent, cars and jeeps 37.10 per cent, light commercial vehicles (LCVs) 104.45 per cent, and motorcycles was up 17.1 per cent.
In the electronics sector, production of air conditions rose 28.05 per cent, switch gear by 28.14 per cent, electric transformers 1.8 per cent, TV sets 1.74 per cent and storage batteries 2.89 per cent, besides various rises in production of other electronics.