KARACHI: Monetary expansion (broad money) reached Rs543 billion during the first nine months (July-March) of this fiscal year, an increase of Rs73bn over the same period last year, mainly due to low inflation and interest rate.

The Consumer Price Index was at 2.5 per cent in July-February 2015-16, providing an opportunity for higher monetary expansion.

The State Bank of Pakistan (SBP) reported on Tuesday that the currency supply doubled to Rs512bn during July-March 2015-16 from Rs283bn in the same period last year.

Net domestic assets (NDAs) of the banking system increased by 3.95pc to Rs413bn as compared to the growth of 3.56pc in the same period last year, which showed higher amount of money is reaching the economy.

Net foreign assets (NFA) remained almost the same as it was last year.

The main growth was due to a massive borrowing by the federal government which reached Rs972bn in July-March 2015-16 as compared to Rs1.113 trillion in the same period last year. But the government benefited by retiring less debt to the SBP this year as compared to the previous year.

On the other hand, the credit off-take by the private sector increased by 87pc, which helped NDAs to grow while monetary expansion increased substantially during the period under review.

Experts said that higher monetary expansion under low inflation would bring higher economic growth.

Recently, Finance Minister Ishaq Dar said that the government was aiming 5.5pc economic growth in FY16. In 2014-15, the economy grew by 4.24pc, which was a seven-year high.

However, recent reports suggested that the flow of funds for public-sector development was much lower than the previous year, which hampered the development programmes and would ultimately slow the growth rate.

The only hope that may prove a catalyst was the private sector’s participation.

Though the credit off-take increased, the size of total credit was much lower than the borrowing size of the government. For economic growth, higher participation of private sector is required.

Published in Dawn, March 30th, 2016