ISLAMABAD: Credit to private sector has increased to Rs 352.3 billion as compared to Rs 222.3 billion in the same period last year
According to the latest report issued by State Bank of Pakistan (SBP), there was high credit off-take in December 2015, which was enough to compensate for the lower cumulative flow during earlier months of the year. This should not be surprising, as private sector credit generally takes off from November onwards due to the beginning of the credit cycle.
It is worth noting that the monthly flow in December 2015-being twice as high as the average monthly flow in December may not just be a seasonal phenomenon. The demand for private sector credit was high due to lower cost of credit and better market conditions.
Similarly, the inclination and ability of banks to lend to the private sector also improved, as suggested by frequency and volume of SBP OMO injections; high deposit growth; comparatively lower government budgetary borrowing and relatively high return on private sector lending. Improvement in credit to private sector over the previous year primarily came from the manufacturing sector, followed by commerce and trade, construction and electricity.
With the exception of ship breaking (which received Rs 13.4 billion lower cumulative), the improvement can be considered broad-based. While credit for working capital and fixed investment categories showed higher growth, credit for trade financing was lower.
