Growing economic activities as private sector borrowing surges fivefold to Rs 715.7 billion

private sector borrowing

According to a report of the State Bank of Pakistan, the private sector borrowing went high by 508 percent to Rs 715.7 billion during the first half of the current fiscal year as compared to Rs 117.7 billion during the same period in the last fiscal year. This is a remarkable sign of economic growth in Pakistan.

The economic analysts are of the opinion that if the same pace continues, it is likely that the country may achieve 5 percent GDP growth in the ongoing financial year. In the fiscal year 2020-21, the total private borrowing was Rs 766.2 billion and despite this little amount, the country could get a GDP rate of 3.9 percent.

At present, there are some apparently unfavorable signs for the economic growth such as the shortage of gas, increase in oil prices, devaluation of the rupee and increasing rate of interest rate, the growth of private-sector borrowing is the indication that achieving the GDP rate of 5 percent may not be just a dream.

Read more: SBP Amendment Bill bars government borrowing from central bank

While announcing the monetary policy statement on December 14, 2021, SBP said that since mid of November 2021, the economic signs remained robust whereas the inflation and trade deficit has increased further due to high global prices and the country’s economic growth. The central bank increased the interest rate to 9.75 percent in December.

The banks said that inflation increased by 7.6 percent in urban areas and 8.2 percent in rural areas, showing the domestic demand growth. The private sector borrowing from the conventional banks was worth Rs 42.6 billion during the first six months of the fiscal year 2020-21 which is Rs 498 billion during the same period, in the current fiscal year.

The borrowing only from the Islamic banks came to Rs 84.7 billion in the period under consideration which was Rs.43 billion during the same period in the last financial year.

The branches of banks which deal in Islamic banking came ahead with private sector borrowing to Rs 132.7 billion during the period from July to, December in the last calendar year while during this time, their borrowing had stood at Rs 33.9 billion, last year.

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