Staff Reporter
Karachi
The federal government has borrowed Rs2,413 billion from commercial banks during fiscal year 2019/2020 as against retirement of Rs771.6 billion in the preceding fiscal year, according to statistics released by State Bank of Pakistan (SBP).
The borrowing was made for budgetary support during July 01, 2020 to June 26, 2020. However, the borrowing from the central bank significantly reduced to Rs98.37 billion during the period under review as compared with Rs3,305 billion in the preceding fiscal year. Banking experts said that the pattern of government borrowing had been changed during the period as the government decided not to borrow from the State Bank under IMF loan program.
They said that banks were enticed towards higher attractive interest rate except for the last four months of the fiscal year 2019/2020 during which the central bank significantly reduced the policy rate in the wake of COVID-19. In a surprise monetary policy announcement on June 25, 2020 the central bank reduced policy rate by another 100 basis points to bring it down to 7 percent. The decision brings down 625 points or 13.25 percent the cumulative reduction in the policy rate since mid-March 2020.
The experts said that the government borrowed the amount for repayment of maturities and budget financing. However, the huge borrowing of the government limited the credit off-take by private sector. The credit to private sector massively shrank to Rs186.39 billion during fiscal year 2019/2020 as compared with Rs681 billion. Experts, however, said that the due to COVID-19 lockdown the business activates were almost halted and it affected the borrowing from the private sector. Interestingly, private sector entrusted the Islamic Banking Branches of Conventional Banks and took loan of Rs133 billion during the last fiscal year as compared with Rs104.86 billion.
The private sector borrowing from conventional banking branches fell to Rs23 billion during the last fiscal year as compared with Rs477.41 billion.
While, Islamic banks disbursed loan to private sector to the tune of Rs29.78 billion during 2019/2020 as compared with Rs98.7 billion in the preceding fiscal year.
