KARACHI: Private sector credit off-take more than doubled in the first eight months of the current fiscal year compared to the same period of last year reflecting a high growth pattern in the economy.

The State Bank of Pakistan’s (SBP) latest data shows that conventional banks were at the forefront extending about 64 per cent of the total disbursement to the private sector during the July-February FY22.

The bank advances to the private sector jumped 116pc to Rs874.3 billion during 8MFY22 compared to Rs403.6bn in 8MFY21.

The data showed that macro indicators support higher growth expectations of the government. The SBP in its recently announced monetary policy predicted that the economic growth rate would be in the mid of 4-5pc for FY22.

Banks achieved their profit targets for 2021 while the liquidity was also very high, noted bankers. Despite high investments in risk-free government securities, large liquidity was available for the private sector.

Even with zero borrowings from the central bank, the government absorbed lesser liquidity of banks which created space for the private sector to borrow more at relatively cheaper rates.

The federal government’s bank borrowings plunged 42pc to Rs634bn in 8MFY22 against Rs1,088bn in the same period last year.

The conventional banks advanced Rs557.5bn to the private sector in 8MFY22 against Rs222.6bn in the same period last year, showing a stellar growth of over 150pc.

Conventional banks like Habib Bank earned a huge profit of Rs62bn in calendar 2021, indicating aggressive banking, increasing potential and higher availability of liquidity.

Researchers and analysts reported that the inflows of record remittances during the current and previous fiscal years created large liquidity for the banks which resulted in their record profits and higher advances to the private sector.

The private sector credit off-take from Islamic banks also increased to Rs114bn compared to Rs74bn during the period. However, the advances by the Islamic banking branches of conventional banks were almost doubled over the eight months of FY21. The credit to the private sector by these branches was Rs203bn compared to Rs107bn in FY21.

The SBP data showed the biggest growth in lending was noted in the house building and construction sector which sharply increased by 72.3pc during a year from January 2021.

The government has been trying to achieve some success by bringing growth in the housing and construction sector but has failed to get the desired results.

Credit to housing and construction increased by 85pc during the year 2021 while the loans for Prime Minister’s housing scheme stood at Rs38bn.

But it was not enough for the government to fulfill its promise to build 5 million houses. The low-cost housing project is reportedly stopped since August 2021 due to an unprecedented increase in the cost of basic construction materials like iron, cement, etc.

Published in Dawn, March 13th, 2022