Private Sector Borrowing Decreases by 52% in First Quarter

The net borrowing of the private sector from the banking sector declined by almost 52 percent in the first quarter of the current fiscal year (1QFY23) as compared to the same period of the last fiscal year.

According to a report published by the State Bank of Pakistan (SBP), the private sector has borrowed a net amount of Rs. 84 billion from the banking sector in the first quarter (July-September) of the current fiscal year (FY23). The private sector borrowing stood at Rs. 176 billion in the same period of the last fiscal year.

The data shows that the private sector’s borrowing from conventional banking branches increased to Rs. 199.99 billion in the first quarter of FY23 on a YoY basis from Rs. 94.80 billion in the same period of the previous year.

The private sector’s borrowing from Islamic banks reduced to Rs. 18.56 billion in the 1QFY23 as compared to Rs. 26.89 billion in the same period of the last fiscal year.

The private sector didn’t register any borrowing from Islamic banking branches of conventional banks in the 1QFY23. The private sector retired Rs. 134.3 billion to the Islamic banking branches of conventional banks in the period under review. In the first quarter of the last fiscal year, the private sector obtained Rs. 54.76 billion in loans from Islamic banking branches of conventional banks.

The reduction in private borrowing from the banking sector portrays a clear picture of a slowdown in the economy. Some economic experts believe that a high policy rate and a slowdown in economic activities were the main contributing factors to the reduction in private sector’s loans.

A high policy rate controls the inflation rate and demand side but also increases the cost of doing business. It is pertinent to mention here that the SBP has increased the key policy rate on multiple occasions in the last year. At 15 percent, the current policy rate is at its highest level in decades.



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