Karachi, November 27, 2024 – Credit offtake by the private sector from Pakistan’s banking system witnessed a remarkable surge, reaching Rs 880 billion during the first four and a half months of the current fiscal year, spanning July 1 to November 15, according to data released by the State Bank of Pakistan (SBP).
In stark contrast, the private sector had retired Rs 82.50 billion during the same period in the last fiscal year. This dramatic shift highlights the increasing reliance of the private sector on banking facilities, driven by favorable economic conditions and lower borrowing costs.
Market analysts attribute this growth in private sector borrowing to the State Bank’s aggressive monetary easing. Since June 10, 2024, the SBP has reduced the benchmark interest rate from 22% to 15%, significantly lowering the cost of borrowing. This has provided a much-needed boost to the private sector, enabling businesses to secure new loans for expansion and operational improvements.
The private sector borrowed Rs 647.35 billion from conventional banks during this period, compared to a retirement of Rs 45.79 billion in the same timeframe last year. Islamic banks also saw a substantial uptick, with private sector borrowing reaching Rs 258 billion, a sharp reversal from the Rs 35 billion retired during the corresponding period of the previous year.
Interestingly, the private sector chose to retire loans worth Rs 25 billion from the Islamic banking branches of conventional banks, a notable increase compared to Rs 1.70 billion retired in the same period last year.
Improved economic conditions have played a vital role in encouraging private sector activity. According to the Ministry of Finance, the Large Scale Manufacturing (LSM) sector registered modest growth, with a 0.5% increase in September 2024 on a month-on-month basis. This slight recovery signals a stable environment for businesses, further supporting private sector credit offtake.
With these developments, the private sector’s expanding role in economic recovery appears increasingly pivotal as businesses leverage banking support for growth and resilience.
