KARACHI: Borrowing from banks jumped by 70 per cent in the first 11 months of the current fiscal year, reflecting higher participation by the private sector to accelerate economic growth rate.

The State Bank of Pakistan (SBP) latest data released on Tuesday showed that the private sector credit offtake increased to Rs489.5 billion during July-May 2020-21 against Rs288.8bn in the same period of last fiscal year badly hit by a severe attack of Covid-19 resulting in economic contraction by 0.47pc in 2019-20.

However, the higher participation of the private sector has changed the economic situation and the economy recovered from the depressing mood and showed much higher GDP expansion beating the expectations of policymakers and analysts.

The State Bank believes that the country will achieve a growth rate of 3.94pc in FY21 against its own earlier estimate of 3pc.

The SBP data showed that the lending to the private sector by conventional banks increased by 180pc to Rs230.9bn in 11MFY21 compared to Rs82.3bn in the same period last year.

Similarly, Islamic banks’ lending to the private sector also jumped by 125pc to Rs112.9bn in 11MFY21 compared to Rs50.2bn in the same period last year.

The increased borrowing indicates higher economic activities with the result that economic managers have not only upgraded their GDP growth estimate for the current fiscal year but they have also projected a 4.8pc economic growth target for FY22.

However, some banking analysts believe that still advances were less than the growth in the deposits due to higher remittances and less domestic consumption. Banks have huge liquidity which is reflecting in their massive participation in risk-free market treasury bills and Pakistan Investment Bonds’ auctions.

The only negative trend noted was a 7pc fall in lending by Islamic windows of conventional banks to Rs145.6bn against Rs156.4bn in the same period of last year.

Despite this decline, the total amount extended as loans by the conventional banks was higher than the Islamic banks which could lend only Rs112.9bn in 11MFY21.

Published in Dawn, June 9th, 2021