KARACHI, April 4: All important monetary targets set for the year 2005-06 have exceeded within eight and a half months, State Bank reported on its website on Tuesday. The rapid growth in bank credit to private sector just crossed the target on March 18 by reaching to Rs330.4 billion. The target for the whole year was Rs330 billion. The rapid growth continued despite higher interest rates compared to last year when interest rates were much lower and credit growth was record high.
The average monthly credit growth comes to Rs38.8 billion which means another Rs135 billion would be added to bank credit making the total at Rs460 billion by the end of the year.
Borrowing for budgetary support was the highest increase among the different figures of the monetary sector. The government borrowed Rs155.9 billion against the target of Rs98 billion for the whole year, an increase of 59 per cent. Last year borrowing for budgetary support was just Rs15.4 billion during eight and a half months.
Credit for non-government sector exceeded by Rs11 billion to Rs331 billion against the whole year target of Rs320 billion.
Net domestic assets of the banking system have also reached close the annual target of Rs365 billion. The net domestic assets were Rs361.8 billion on March 18, 2006.
The annual targets, which were achieved in just eight and a half months, would bound to deviate from the State Bank’s monetary policy and the monetary growth would cross the annual target of 12.81 per cent. The current monetary growth reported at 9.02 per cent against the growth of 12.60 per cent during the corresponding period last year.
The net foreign assets witnessed a negative growth of Rs94 billion during the period under review against the target of Rs15 billion increase in the same.
“Higher imports, which registered 46 per cent increase during the first eight months of the fiscal, are one of the reasons that caused negative growth in the net foreign assets,” said Salman Jafrey, analyst at Jahangir & Siddiqui Co.
He said that the import bill of petroleum products had increased by 56 per cent to $3.86 billion compared to $2.48 billion the same period last year.
The data also showed that money was still being poured into the public sector enterprises while the target was to recover Rs10 billion from Wapda, KESC, PTCL, PIA and PTC. About Rs1.816 billion were pumped into the public sector enterprises while PTCL, Pakistan Steel and KESC had already been privatized.
Analysts said that since all important monetary targets set for the current year had been achieved within eight and a half months, the rest growth would simply add to monetary growth and inflate the economy.
They doubted that the tight monetary policy could restrict the monetary growth within the target as all indicators were going against it.
They said the government borrowing for budgetary support could breach all records if it continued to fetch more money from the banking system and it may touch the figure of Rs200 billion.
Banks, which had been earning record profits for the last two years, were not ready to slowdown the credit growth to private sector. Most of their income was interest-based that was why they were using their maximum liquidity for advances which pushed up the advance to deposit ratio to 77 per cent.
