KARACHI, July 17: The private sector borrowing from the banks has been set at Rs94.7 billion for the fiscal July-June 2002-03.

The target is part of the new credit plan that was approved on Wednesday by the National Credit Consultative Council (NCCC), headed by State Bank Governor Dr. Ishrat Husain.

The council that met here at the State Bank head office with Dr. Ishrat in the chair projected net government borrowing for budgetary support at minus Rs3 billion. The council projected a net retirement of Rs29.2 billion under commodity operations — or borrowing of state-run agencies for procurement of commodities from the growers.

The SBP said in a statement issued after the meeting that all these targets were part of the credit plan 2002-03 that envisaged a monetary expansion of 10 per cent or Rs175 billion. The plan envisages Rs20 billion for public sector enterprises (PSEs). So a sum of Rs114.7 billion has been earmarked for non-government sector (private sector plus PSEs) during the current fiscal year.

The credit plan has been drawn keeping in view the inflation target of 4 per cent and GDP growth target of 5 per cent.

Without giving numbers the SBP statement says that the council was informed that the deviation in 2001-02 credit plan estimates and the actual outcome was mainly due to unexpected but positive developments in the external sector. “About 85 per cent of the money supply was due to capital inflows, which led to an unprecedented and large buildup in net foreign assets (NFA),” the statement said.

“A review of the factors responsible for low private sector credit expansion during the year revealed that higher retirement of export refinance; low prices of raw and lint cotton; low inflation rate; appreciation of rupee; higher CBR refunds; financing through TFCs, etc., depressed the demand.”

The members of the meeting, however, agreed that though the credit expansion by banks in the private sector was low, the genuine credit requirements of all the segments were adequately met from other sources. “For example, both agriculture and manufacturing sectors recorded higher expansion in credit compared to the last year.”

“The council also discussed the performance of NCBs (nationalized commercial banks), privatized banks and foreign banks and advised them to enhance their efforts for expansion of credit to the private sector. The lending rates issues were also discussed in detail and it was observed that though the overall lending rates have come down, there is still a room for further reduction in these rates,” the SBP statement adds.

Earlier the Agricultural Credit Advisory Committee (ACAC) reviewed the situation of agricultural credit.

The committee noted that overall credit expansion during the year 2001-02 was Rs50.8 billion against Rs43.1 billion a year ago — an unprecedented 18 per cent increase in a non-subsidized credit regime.

For the year 2002-03, the committee recommended an overall credit expansion of Rs62.5 billion for agriculture — up 4.2 per cent than the last year’s target and 23 per cent higher than the actual disbursement of the last year.

The SBP statement said that the committee decided that the finances provided for processing of high quality seeds shall be treated as part of banks’ credit for the purpose of mandatory targets.

“In addition it was also decided that the financing to leasing companies by the banks for the purpose of providing agricultural equipment/machinery on leasing/rental/hiring basis to the farmers shall also be treated as part of banks’ mandatory targets for agriculture,” it adds.