KARACHI , May 23, 2023:Banks’ net lending to the private sector in the country dropped 90 per cent during the first 10 months of the current fiscal year (2022-23), the State Bank of Pakistan (SBP) data shows.
The lending to the private sector has witnessed a visible decline in the wake of historic inflation and interest rates as banks are not willing to take risks by extending loans to the private sector struggling to run businesses in highly unfavourable situations.
Banks are happily lending money to the cash-strapped PDM government to earn risk-free abnormally high-profit rates close to 22pc.
Net bank advances to the private sector tumbled to just Rs129.6 billion from July 1 to May 5 (FY23) against Rs1,296bn in the same period of last year, the central bank’s data further shows.
The conventional banks’ lending to the private sector plummeted by 84.4pc to just Rs128.7bn in July-April 2022-23 from Rs820.4bn in the corresponding period last year. While, the lending by the Islamic banks to the private sector almost halved to Rs98.6bn in the current fiscal year from Rs196.5bn in the same period last year.
The private sector could face further decline of bank credit in the coming months since there are restrictions on imports amid dwindling foreign exchange reserves.