Guest Post by Muhammad Zubair, Minister of State & Chairman, Privatisation Commission Pakistan
Another positive on the economic front!
According to the latest data released today, banking credit is at 6-year high. The credit growth is broad based including financing for external trade financing, working capital, fixed investment and consumer financing. Private sector credit is at an 8-year high.
It clearly is reflecting that private sector is encouraged to come forward and play its role.
These are positive signs for future economic growth.
Another big news!: State Bank of Pakistan today released figures on total foreign investment for the year 2013-14. This includes $2 billion of Eurobond. The total foreign investment is at $4.377 billion compared to $1.58 billion for the preceding year. Foreign investment crossed $5 billion after more than 6 years.
Yesterday, Moody’s revised outlook on Pakistan from Negative to Stable. Excellent news!
Key factors in improved rating include improvement in external liquidity position, improvement in financial accounts, significant increase in foreign exchange reserves and overall positive direction of the economy.
This is by no means a small achievement. But if the process is derailed, we all have to pay for it. It is the momentum that needs to be kept.
Here’s an excerpt from the Pakistan Pulse Report: After a gap of six years, advances of Pakistan scheduled banks grew by 10.8% in FY14 to reach Rs 4.3 trillion compared to 3.4% in FY13. The advances growth is highest since 2008 economic crisis and is broad-based in the sense that it financed external trade activities, working capital, fixed investment and consumer financing. On the other side, private sector credit showed a healthy growth of 11.3% after a gap of six years. In 1H2014, advances grew 5.3% compared to a growth of 0.3% in 1H2013.
During FY09-13, advances grew at CAGR of 5.6% despite 13.8% deposit growth as banks refrained from lending due to risk aversion and unattractive business outlook. Consequently, Advances to Deposits Ratio (ADR) declined from 77% in FY09 to 53% in 2013, while credit penetration (Advances as a percent of GDP) dropped to multi-year low of 19%; lowest among regional and comparable economies. The same ratio in India is 54%, Bangladesh 48%, Sri Lanka 42%, Nigeria 29% and Vietnam 105%. However, reduction in Govt. borrowing, better country outlook after new Govt. took charge and rising industry credit appetite shifted banks’ focus towards private lending in FY14 and resulted in stable ADR of 53%.
Reader comments are welcome!