47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Money and CreditCredit to Private SectorThe credit availed bythe privatesector duringJuly-11 th May, 2011-122 stood at Rs 234.8 billionascomparedto Rs 107.8billion in the same periodlast year. On the otherhand year toyear growthinprivate sector credit was 7.5 percent up until 11May, 2012. There is a strong relationship betweenprivate sector credit and economic growth.However,heavy borrowing fromthe bankingsystem has restricted the credit expansion to theprivate sector.desiredd boost in private investment demand couldnot take place dueto energy shortages and anunfavorable law and order situation. Additionally,substantial government borrowing has crowded outthe private sector from receiving credit. This haslimitedthe availability of credit. Similarly, due torising non-performingloans (NPLs)bankspreferred to investin liquid assets rather thanextending credit to the private sector.Fig-5.4 : Growth of Private SectorThe private sector witnessed the highest flow ofcredit in the second quarter of fiscal year 2011-12standing at Rs. 282.2 billion.Despite thesubstantial credit flow, the cumulative privatesector credit (PSC) expansion during July – 11 thMay 20122 was limitedto Rs 234.8 billion becauseof more than usual seasonal retirements in the firstquarter offiscal year 2012.Credit to Private Sector (SectoralAnalysis)The revival of private investment in the economywas one of the main concerns for SBP to ease themonetary policy stance in 2011-12. However, thepercentages25.020.015.010.05.00.02005-062006-07072007-082008-092009-102010-112011-12(July-11May)Table 5. 3: Credit to Private SectorSectorsOverall Credit (1 to 5)1. Loans to Private Sector BusinessA. AgricultureB. Mining and QuarryingC. ManufacturingTextilesD. Electricity, gas and water supplyE. ConstructionF. Commerce and TradeG. Transport, storage andcommunicationsI. Other private business n.e.c2. Trust Funds and NPOs3. Personal4. Others5. Investment in Security& Shares of PrivateSectorSource: State Bank of PakistanEnd June StocksJuly-March(Flows)Jun-10 Jun-11 2010-11 2011-122,749.3 2,918.2 228.3 41.62,258.5 2,431.8 222.1 42.9169.517.51,263.6470.2215.567.1229.7105.123.613.1321.511.1180.517.91,385.4514.7269.467.7213.7106.229.418.0294.016.43.30.4205.3 105.5 28.1 -0.9 -18.1 -0.6 3.63.4-17.6 6.710.5-2.865.016.4-12.2-9.5-4.3-2.5-1.4-1.0-7.8-0.1145.1158.0 13.6 7.5Rs BillionGrowth Rates2010-11 2011-128.3 1.49.8 1.82.0 5.82.3 -15.716.2 4.722.4 3.213.1 -4.5-1.4 -14.0-7.9 -2.0-0.6 -2.315.1 -4.825.7 -5.4-5.5 -2.660.6 -0.69.44.7Sector wise growth incredit to the private sectorshows that loans to private sector businessesregistered a sharp decline. In flowterms, the creditexpansion during the period under review stood atRs. 42. .9 billion against Rs. 222. 1 billion in July—69