KARACHI: Private sector borrowing has jumped over 92 per cent to Rs600.5 billion during July-Feb22 compared to Rs312bn in the same period last year, according to latest data released by the State Bank of Pakistan (SBP) on Thursday.

The jump in borrowing comes at a time when SBP has raised interest rates to 10.25pc from 5.75pc in January 2018.

Conventional banks’ lending doubled from Rs204.4bn to Rs409.8bn during the eight months whereas lending at Islamic banks also jumped to Rs90bn compared to Rs23.8bn last year. Islamic banking arms of the commercial banks also increased their lending to the private sector reaching to Rs100bn compared to Rs84bn last year.

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The bankers said that higher outflow to private sector is a result of narrowing options for banks to park their liquidity adding that the government has also reduced long-term borrowings from banks, contrary to the trend in previous government which offered high return on investments.

With increase in inflation, the interest rates have been rising but the private sector borrowing has continued unabated. The high rates could be counterproductive for growth and expansion of economy but the borrowing trend could likely result in higher economic growth for fiscal FY19.

The numbers are encouraging for the government as private sector continues to borrow at a stronger pace despite steep rise in interest rates, said a senior banker. However, he also warns that higher private sector borrowing, at the time of rising interest rates, could lead to an increase in non-performing loans with banks.

Published in Dawn, March 8th, 2019