KARACHI: The government sector continued to dampen the private-sector credit uptake in the first 11 months of 2015-16, latest data released by the State Bank of Pakistan (SBP) shows.
Banks’ credit to the government sector amounted to Rs6.3 trillion at the end of May, up 19.3% from the beginning of 2015-16. In contrast, growth in bank loans to private-sector businesses stood at just 7.9% over the same period, SBP data shows.
This means private-sector credit uptake in Jul-May grew at a pace that was less than half the growth rate recorded in the banks’ credit to the government sector.
Outstanding loans to private-sector businesses amounted to Rs3.2 trillion at the end of May. This equals to only 25.7% of total outstanding credit in the economy. In contrast, banks’ loans to the government constitute nearly 50% of the total outstanding credit in the economy.
An increase in loans acquired by private-sector businesses shows they are optimistic about economic growth. With more money to buy inventory and expand operations, businesses create new jobs and contribute to the GDP growth.
The largest borrower within private-sector businesses is the manufacturing sector whose outstanding loans amounted to almost Rs1.9 trillion, up 9.9% over the 11-month period.
Loans to electricity, gas and water supply businesses in the private sector increased 16.5% in July-May to stand at almost Rs311.2 billion at the end of last month.
The rise in loans to the construction industry in the 11-month period was far greater (49.9%), although the outstanding amount was smaller in absolute terms at Rs92.2 billion.
Credit to businesses that belong to the commerce and trade sector amounted to Rs250.5 billion, up 5.7% from the beginning of the fiscal year.
Loans extended under the personal category amounted to almost Rs404.9 billion at the end of May after rising 5.7% over the preceding 11 months.
Banks have extended almost a quarter of total loans under the personal category to their own employees. Credit to bank employees amounted to Rs97.2 billion at the end of May, which was over 24% of total outstanding personal loans.
Consumer financing amounted to Rs300.4 billion at the end of May, which was 9.1% higher than outstanding consumer financing recorded at the end of June 2015.