ISLAMABAD: Credit to private sector by the banking system was 33 percent of total lending during 2020-21. Considerably lower compared to other regional countries (India's 55.3 percent, Bangladesh's 45.1 percent, Sri Lanka's 49.7 percent, Bhutan's 68.9 percent and Nepal's 87.8 percent).
According to State Bank of Pakistan, total banking system lending to the government up to 25th June 2021 was of Rs 1.785 trillion while sources in the finance ministry stated that latest data shows that credit disbursement to the private sector stood at Rs 594 billion up to June 2021 against Rs 186 billion for the same period a year before.
The government borrowings from scheduled banks is mainly through fortnightly auctioning of Market Treasury Bills (MTBs) of 3, 6 and 12-month maturities.
Monthly economic outlook and update of finance ministry for the month of June 2021 noted that from 1st July to 11th June, 2021 credit to private sector increased significantly by Rs 457.9 billion against Rs 195.2 billion last year, led by fixed investment loans.
During July-May, fiscal year 2021, credit for fixed investment increased by Rs 158.9 billion against the borrowing of Rs 16.4 billion last year, which is a very significant rise reflecting more business confidence and overall further improvement in medium to long term growth outlook.
The government's heavy reliance on borrowing from the banking system for budgetary support led to increase in domestic debt to Rs 26.96 trillion in May 2021 from Rs 23.51 trillion a year ago, with long term debt rising from Rs 17.4 trillion to Rs 19.3 trillion and permanent debt from Rs 13.7 trillion to Rs 15.3 trillion. An official of the finance ministry said that fiscal stimulus provided by the government during the Covid pandemic has been one of the factors for increase in domestic debt.
Copyright Business Recorder, 2021