KARACHI, Jan 22: Contrary to last year, Public Sector Enterprises (PSEs) this year are borrowing heavily from scheduled banks despite the fact that they are still loss-making entities.

The PSEs borrowed Rs42 billion from scheduled banks during the first half of the current fiscal year, according to a report of the State Bank issued on Tuesday.

The government pumps billions into public sector enterprises. They also borrow from scheduled banks and the loans are paid back with the help of the government.

These heavily indebted loss-making PSEs made a net retirement of Rs275 billion in the first half of the previous fiscal year.

There are also reports that the government is creating jobs in these PSEs prior to elections to seek political mileage.

The dumping of new employees means that the PSEs would require massive revenues to pay salaries to employees while they are already making losses for years.

“It is government guaranteed borrowing,” said a banker.

It is feared that the rising PSEs debt may bring trouble for banks as their total stock till June 2012 was Rs281 billion.Unlike PSEs, banks’ advances to private sector have vastly reduced in the first half of this fiscal year.

The balance sheet of banks tells that the private sector credit off-take is just 27 per cent of what it was in the first half of the previous fiscal year.

Business community complains that banks don’t like to deal with them for borrowings.

Private sector credit off-take was just Rs52 billion while it was Rs190 billion during the same period of six months. The private sector had started showing some improvement last year, but law and order situation sent them a message to stay away.

“Both imports and exports dropped during the first half of this fiscal year.

It shows that economic activities have further fallen which would result in poor rate of economic growth this year,” said Aamir Aziz, a manufacture and exporter of textile goods.

He said the entire business community is fed up with the deteriorating law and order situation.

Almost all PSEs are making billions of losses and tax-payers money is used to keep them alive, instead of making them able to run their affairs without government help.