July 4, 2003	Friday	Jumadi-ul-Awwal 3,1424

KARACHI, July 3: The National Credit Consultative Council (NCCC) is holding its annual meeting on Friday at the State Bank to discuss a Rs230 billion credit plan for 2003-04 to ensure a 5.3 per cent economic growth and keep inflation rate below 4 per cent.

A draft credit plan of Rs230 billion stipulates 11 per cent monetary growth for the 03-04 fiscal year. Of this, Rs130 billion would be through accumulation of net foreign asset (NFA). It indicates that bulk of the money flow in the current fiscal would continue to be from foreign channels as was the case in the outgoing fiscal of 02-03. But as compared to 02-03, when NFA accumulation exceeded Rs300 billion, the NFA flow in 03-04 would be reduced by more than half to Rs130 billion in the current fiscal.

In sharp contrast, the net domestic asset (NDA) of the banking system is expected to generate Rs100 billion money flow in the current fiscal year as against a contraction of Rs11.2 billion witnessed in 02-03 year. A significant feature of the 03- 04 plan is stipulation of Rs85 billion credit for the private sector. Another sum of Rs6 billion credit is indicated for public sector enterprises.

Government’s borrowing for budgetary support is pitched at Rs15 billion. Another amount of Rs1.6 billion is indicated against privatization and zakat. Government is expected to retire Rs6 billion commodity credit in the current fiscal year. Net government borrowing in the current fiscal year is expected to remain at Rs10.6 billion.

A tentative five year programme shows that macroeconomic stabilization remains focus of government’s policies. In next five years, the government would endeavour to keep monetary growth within 11 per cent and control inflation at below 4 per cent level till 2007-08.

Monetary growth in the outgoing fiscal year of 02-03 exceeded 16.4 per cent mainly because of unprecedented accumulation of net foreign asset, which went beyond Rs300.51 billion mark by May 2003.

Original credit plan form 02-03 was for Rs190 billion. It was revised to Rs281.50 billion after witnessing an unprecedented flow of remittances and foreign exchange in February 03. Till June 14 last the total growth of monetary asset was Rs289.29 billion.

The foreign exchange flow during 02-03 was beyond expectations of the planners and monetary supervisors who had to revise the credit plan mid way in February 2003. Even projections of the revised plan were also knocked out mainly because of massive remittances, a rise in direct foreign remittances and quick arrival of export proceeds.

In the original credit plan of 02-03 the NFA was indicated at Rs91.50 billion. It was revised upward to Rs271 billion in February 02 and was estimated at Rs300.51 billion on June 14 last.

Bank credit to private sector grew by Rs138.6 billion during July 02 to June 14, 2003 showing more than four-fold increase over 01-02 credit given to private sector. All this amount is reported to have been given by the commercial banks said to be 350 per cent more than what was offered by these banks to private sector in 01-02.

A sharp fall in lending rates during 02-03 is said to be the main driving force behind rise in private sector demand for bank credits. An official document notes that private sector’s demand for credit from banks continued even beyond third quarter of the fiscal year (March to June 03). This is period usually when bank credits are retired by the businessmen.

Manufacturing sector showed big appetite for bank credit and recorded a net off-take of Rs64.7 billion during 02-03. Within manufacturing textiles emerged as the biggest consumer of bank credits and obtained Rs43.9 billion. Trade activities took up Rs17.1 billion credit, agriculture Rs6 billion, power, gas, water and sanitary services Rs2.4 billion and construction Rs1.6 billion.