Private Sector Bank Deposits Soar by 21% as Investors Seek Secure Havens

Private Sector Bank Deposits Soar by 21% as Investors Seek Secure Havens

Karachi, September 18, 2023 – The private sector in Pakistan has shown a significant surge in bank deposits, increasing by a remarkable 21 percent. This uptick reflects a growing preference for secure investments in the face of ongoing economic challenges.

According to data released by the State Bank of Pakistan (SBP) on Monday, the total deposits within the banking system have risen to Rs 5.7 trillion by the end of August 2023, compared to Rs 4.71 trillion a year ago.

READ MORE: Bank Deposits Reach New Record High at Rs 26.11 Trillion

Market experts attribute this substantial increase to the private sector’s pursuit of safer avenues for generating returns. They emphasize that challenging economic conditions, characterized by high interest rates and persistent inflation, have led to the closure of numerous industries.

The SBP itself acknowledged the worsening economic and financial conditions, particularly during the first half of CY23. In response to the high and sustained inflation, the central bank increased the policy rate by 600 basis points to 22.0 percent.

READ MORE: Banking Sector Records Impressive 125% Profit Surge Amid Economic Challenges, Reports SBP

A research report from Arif Habib Limited has revealed a consistent decline in the performance of Large Scale Manufacturing (LSM) in Pakistan. Recent data from the Pakistan Bureau of Statistics (PBS) indicates a 3.6 percent month-on-month decrease and a 1.1 percent year-on-year decrease in the output of Large Scale Manufacturing Industries (LSMI) for July 2023. The LSMI Index stood at 108.0 during July 2023, down from 109.2 in July 2022.

Analysts at Arif Habib Limited attribute this decline in LSM to several factors, including policy measures taken by monetary and fiscal authorities to curb aggregate demand and the high cost of doing business.

READ MORE: Karachi Chamber Issues Statement on Hike in Petroleum Prices

The sector-wise decrease during the first month of FY24 was primarily led by Textile (-22.0% YoY), Coke & Petroleum Products (-2.3% YoY), Beverages (-6.7% YoY), Iron & Steel Products (-2.7% YoY), Automobiles (-66.1% YoY), Electrical Equipment (-22.4% YoY), Paper & Board (-15.4% YoY), Other Transport Equipment (-19.0% YoY), Fabricated Metal (-4.6% YoY), Wood Products (-4.5% YoY), Leather Products (-2.0% YoY), Furniture (-57.8% YoY), and Computer, Electronics, and Optical Products (-32.1% YoY).

However, amidst these economic challenges, the data indicates that bank deposits from the manufacturing sector have seen a substantial increase of 33 percent, reaching Rs 1.62 trillion by August 2023, compared to Rs 1.22 trillion a year earlier.

READ MORE: Business Community Expresses Disappointment Over Hike in Petroleum Prices

This surge in private sector bank deposits underscores the demand for secure financial instruments as individuals and businesses seek to navigate the complexities of the current economic environment in Pakistan.

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