KARACHI: State Bank of Pakistan’s latest data showed that the private sector borrowing reached to a record low and the borrowing has been falling sharply for last couple of months.

The lowest Rs47.5 billion credit during more than nine months of the current fiscal year tells the story of private sector’s sharply shrinking participation in economic growth.

During the same period last year, private sector had borrowed Rs333 billion which means this year’s borrowing is just 14 per cent of what was borrowed last year.

The revised figures of economic growth do reflect the sharp decline in economic activities but the State Bank data represents the worst kind of financial picture of economy.

The most critical was the foreign front of the economy but with the help of donors and fall in oil and other commodity prices, it started improving.

Economists and analysts feel that drying up of flow of liquidity in the economy could bring a precipitous fall in economic growth.

The industry and trading sectors had been raising a voice against a very high interest rate that is still 15 per cent and which exorbitantly increased financial cost, making them unable to remain profitable.

This situation was well represented by another report of large scale manufacturing growth which fell to a negative 5.7 per cent during the first eight months of the current fiscal against a positive 5.3 per cent growth last year.

The falling credit flow shows that the private sector has stopped borrowing, deferred expansion plans and wrapped up economic activities which either went in loss or were giving no profit.

Another grim picture which came out from these figures was record borrowing by public sector enterprises which means they are making losses or their dependence on borrowing rose to a very high level.

The public sector enterprises borrowed Rs142.5 billion during over nine months against Rs36 billion during the same period last year. It reflects that the public sector companies are either facing some extraordinary situation or were being administered by incapable managements.

The only positive indicator was lowering of government borrowing from the State Bank which was blocked by the IMF after an agreement in November 2008.

The borrowing from the SBP fell to Rs113.7 billion during the same period against Rs425 billion borrowed in the corresponding period of last year.

However, this low SBP borrowing shifted towards borrowing through scheduled banks as government borrowed Rs101 billion against retirement of Rs98.7 billion of the last year.

This massive decline in SBP borrowing and sharp decline of credit flow towards private sector created another record of lowest monetary growth.

The SBP data showed that the monetary growth during the period was just 1.61 per cent against 8.12 per during the same period last year.

The monetary growth is well under control and is as per demand of the IMF but this is being achieved at the cost of economic growth. The government has slashed its annual development plan. In the economies, like Pakistan, the government’s investment is vital for overall economic growth.