Availability of finance for private sector has become critical issue: SBP chief

Governor State Bank of Pakistan Shahid H. Kardar has said that the availability of finance for the private sector has become a critical issue in addition to the energy shortage. He was addressing the inaugural session of the 7th Annual Conference on Management of Pakistan Economy organised by Lahore School of Economics on Wednesday.
The theme of this year''s conference is "Financial Sector Development and Management''. Rector Lahore School of Economics Dr Shaid Amjad Chaudhry, vice-chancellor Pakistan Institute of Development Economics Dr Rashid Amjad, Director CREB Naved Hamid also spoke on the occasion.
Kardar said that fiscal deficit has become a structural issue, as the terms of trade has shifted in favour of sectors, which are either non tax paying or are poorly taxed and also fall under the provincial administrative domain. He also said that since September 2010, the government has only been borrowing from the commercial banking sector, which has led to the crowding out of private sector credit. Therefore, the availability of finance for the private sector has become a critical issue in addition to the energy shortage.
He said that the profitability of banking sector has doubled in the last year but 95 percent of the pre-tax profits is being generated by the top five banks, which accounts for 51 percent of the total banking assets. He said that growth in the advances to the private sector has been between two to three percent over the few years.
Speaking on the occasion Dr Shahid Amjad Chaudhry gave an over view of the present state of the Pakistan economy. He said that the macroeconomic situation was stabilising and foundations had been laid for the steady growth. The agriculture sector has grown remarkably and cooperate sector profits have increased in the last year.
Amjad said that the greater reliance on the forex exchange market mechanism means that the adjustments in the forex market would help adjust exchange rate automatically. Energy shortage remains a critical issue and this needs to be a greater focus on reforming the management of the power generation and distribution systems.
He also said that on fiscal side serious thoughts needs to be given to the tax reforms that will put in place to bring fiscal accounts in to balance. With the 18th amendment and devolution of taxation powers on a number of subjects to the provinces, the devolutionary process holds great promise for promoting economic growth and ensuring inter-provincial income equality.