KARACHI: Monetary expansion at the end of third quarter was up by 8.82 per cent, which is higher than last year, mainly on account of higher net domestic assets (NDA) of the banking system.

A report issued by the State Bank on Thursday mentioned that monetary expansion in terms of money during the first nine months of the current fiscal year was Rs674bn that was significantly higher than Rs537bn noted in the same period of last year.

Monetary expansion was higher despite single digit low inflation that reflects non-productive use of money by the government.

In the presence of low inflation, higher monetary expansion is believed to be a positive development, but expansion failed to penetrate in economy as most of the money was used by the government mainly for unproductive plans.

In fact, higher use of banking money by the government put the economic growth in a trouble as banks kept on investing their 80 to 90pc money in government papers.

Net domestic assets during the nine months are also very high compared to last year. In terms of money, net domestic assets rose by Rs835bn against Rs781bn of last year.

The NDA comprises net government sector borrowing and credit to non-government sector, including other items.

The biggest contributor to net domestic assets was government borrowing for budgetary support, which was Rs832bn.

This could be surprising that the government borrowed Rs863bn alone from scheduled banks, higher than the borrowing for budgetary support.

The higher monetary expansion also reflects low penetration of money into the private sector. During this period, private sector credit off-take showed disappointing figures.

The money supplied to private sector was so poor that it failed to bring any development for the growth of economy.

The figures showed that at the end of the third quarter, the private sector borrowed just Rs141bn that was even lower than the corresponding period of last year, which was Rs223bn.

Even this money for private sector was mostly borrowed for the working capital.

The other non-productive supply of money was for Public Sector Enterprises (PSEs) which rose to Rs42bn that was opposite to net retirement of Rs169bn noted during the same period last year.