KARACHI, June 18: All local and foreign banks mobilized combined deposits of Rs327 billion in 11 months of this fiscal year primarily due to increased economic activity in the wake of a higher-than-projected growth in GDP.

They managed to expand their deposit base also due to rising remittances of foreign exchange from Pakistanis living abroad. Expatriate Pakistanis sent home $3.81 billion during July-May 2004-05, which created rupee equivalent deposits of around Rs227 billion at an average exchange rate of Rs59.50 a dollar.

Total deposits of all local and foreign banks operating in Pakistan rose from Rs1,993 billion at end-June 2003 to Rs2,320 billion at end-May 2005, showing an increase of Rs327 billion. The amounts cover only domestic deposits of the banks operating in Pakistan, excluding the deposits that they hold abroad.

Pakistan economy is estimated to have grown 8.4 per cent during this fiscal year ending this month, up from 6.4 per cent in the last fiscal year and exceeding the target of 6.6 per cent.

Apart from a fast economic growth and huge inflow of remittances of foreign exchange from overseas Pakistanis, frequent offering of state-owned shares to public through stock exchange has also helped expand the deposit base of the banks. Many people who held cash in hand brought the same into the banking system to be able to buy these shares. Besides, the government efforts to document the economy also have a hand in it.

As the economy is targeted to grow by seven per cent in the next fiscal year and remittances from overseas Pakistanis are expected to reach $4.2 billion, the deposit base of the banking system should continue to expand at a high rate. As for this fiscal year, the domestic deposit base of the banks might see total expansion of Rs360-370 billion at the end of the fiscal year on June 30.

The domestic deposit base of the banking system widened by Rs305 billion in the last fiscal year and by Rs275 billion in the year before.

A huge expansion of Rs327 billion in the banks’ deposit base in the first 11 months of this fiscal year enabled them to increase their lending volumes. The SBP data show that all the local and foreign banks operating in Pakistan issued Rs428 billion worth of advances: the stock of banks’ advances rose to Rs1752 billion at end-May 2005 from Rs1324 billion at end-June 2004.