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Tuesday, April 16, 2024

Private sector borrowing jumps up by 80pc

In the first eight months of the current fiscal year, private sector borrowing increased by 80 per cent indicating an acceleration in the pace of economic activities after the pandemic.

Though the government is not very confident about the current rate of economic growth, the 80 per cent increase in borrowing by the private sector suggests that the decline in covid cases has resulted in increased  economic activities throughout the country. Compared to last year, the pace of borrowing by private sector is higher which indicates that the country might be heading towards economic recovery.

According to the latest date shared by The State Bank on Monday, the private sector borrowed Rs352 billion during July to Feb 19, FY21 which is 80.5pc higher than the borrowing of Rs195bn made during the same period in FY20.

The net borrowing of the previous week stood at Rs291.23 billion. Weekly data released by the central bank, shows that the sector’s borrowing has increased by Rs159.18 billion over the year since the borrowing as of the corresponding period of last year was recorded at Rs187.16 billion.

The non-government sector is broadly divided into three categories, the private sector, the public sector enterprises and non-banking finance institutions (NBFIs). Commercial banks are the primary source of financing for the private sector, including conventional banks, Islamic banks and Islamic branches of conventional banks.

Taking the lead, Conventional banking branches gave out loans worth Rs195bn to private sector during this period compared to Rs73bn in the same period of last fiscal; an increase of 167pc reflecting the higher activities in trade and industry.

Islamic banks also stepped up their efforts as their lending to the private sector rose by125pc to Rs62bn compared to Rs27bn in the same period of last fiscal. The share of Islamic banking in the financial industry has been increasing for the last three years. Private sector borrowing from Islamic banks in FY20 was Rs33bn indicating the trend of these financial institutions for lending.

The first quarter of the new fiscal year was severely impacted by Covid19 outbreak in March 2020 but the borrowings started from the second quarter of FY21.

The previous fiscal year was so badly affected by the pandemic that the private sector almost stopped borrowing in the last quarter of FY2. Till now, the private sector borrowing has increased by Rs157bn or 80.5pc till Feb 19 from July 1.

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The private sector borrowing was just Rs196.3bn for entire FY20 but as Covid19 started losing its grip on the country, the borrowing started to increase and the economic activities started picking up momentum.

For the first eight months of the current fiscal year, total borrowing exceeded Rs1 trillion mark compared to Rs861bn borrowed in the same period of last fiscal as the government also borrowed heavily from the scheduled banks.

The surge in private sector borrowing, however, suggests that the investors’ confidence is gradually being revived and the country is on track to economy recovery.