Private Sector Borrowing Surges 170 Percent in 9MFY22

Private Sector Borrowing Surges 170 Percent in 9MFY22 in 2022

Private sector bank borrowing increased by 170 percent to Rs. 1,198 billion in the first nine months (July-March) of the current fiscal year 2021-22, from Rs. 443 billion.

The private sector obtained loans worth Rs. 1,198 billion from the banking sector during the first nine months of the current fiscal year, indicating a positive trend in the private sector, according to the State Bank of Pakistan (SBP). Up to March 31, 2022, the private sector’s total debt stock from local banks was Rs. 8,827.38 billion.

Some economists believe that this increase was possible after the government reduced its borrowing from the private banking sector to bridge the fiscal deficit.

They believed that under the new policy, the government would rely heavily on external loans to bridge the fiscal deficit. According to the Finance Ministry, the government borrowed Rs. 1,025.6 billion in external loans and Rs. 346 billion in domestic loans (both banking and non-banking) to bridge the country’s fiscal deficit during the first half of the fiscal year.

The government obtained Rs. 454.4 billion in external loans and Rs. 684 billion in domestic loans, including banking and non-banking loans, to bridge the budget deficit to Rs. 1,137 billion in the first half (July-December) of the previous fiscal year 2020-21.

According to the data, the government has provided a cushion for the private sector to meet the need for liquidity to run the business.

According to the SBP, private sector bank borrowing from conventional banking branches increased by 261 percent to Rs. 791.56 billion in the first nine months of the current fiscal year, up from Rs. 219 billion in the same period last year. By March 2022, the private sector’s debt stock from conventional banking will have reached Rs. 6,476.67 billion.

During the first nine months of the current fiscal year, the private sector borrowed Rs. 160.4 billion from the country’s Islamic banks. During the first nine months of the previous fiscal year, it obtained loans worth Rs. 91 billion from Islamic banks. So far, the private sector has borrowed Rs. 1090.7 billion from various Islamic banks in the country.

Loans from Islamic Banking Branches of Conventional Banks increased by 84.6 percent during the first nine months of the current fiscal year, from Rs. 133.4 billion to Rs. 246.3 billion when compared to the same period last year.

According to the SBP report, credit to PSEs was increased by Rs. 4 billion during the first nine months of the current fiscal year. During the first nine months of the previous fiscal year, the Public Sector Enterprises retired Rs. 24.9 billion to the banking sector.

During the first nine months of the current fiscal year, credit to Non-Banking Financial Institutions (NBFIs) was also increased by Rs. 5.7 billion. So far, the total debt stock from NBFIs has risen to Rs. 78.5 billion.

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