ISLAMABAD: Bank lending to the private sector has shrunk to just Rs28 billion this fiscal year after plummeting 98 per cent compared to last year, central bank data showed on Tuesday.
The State Bank reported that from July 1 to May 19, the private sector borrowed a record low Rs27.9bn from banks compared to Rs1.414 trillion a year ago.
The economy has been facing a constant problem of a record-high interest rate of 21pc and headline inflation at 36.4pc. Average inflation is estimated to reach 30pc this fiscal year, which ends in June. “There is no chance to run a business with such a high interest rate and an unprecedented 36pc inflation,” Aamir Aziz, who manufactures and exports finished textile products, told Dawn. He said textile exports had already started falling and feared that things would worsen in the coming months since millers had exhausted their cotton stocks.
“The country has produced five million cotton bales while the need is about 15 million bales. The country has no foreign exchange for imports and this is the reason that the private sector is out from the banks,” he said.
Bankers said interest rates were much higher than the policy interest rate of 21pc, depending on risks attached to borrowers. They said businesses couldn’t sustain in this scenario. The financial sector believes that the State Bank may go for another increase to counter unrelenting inflation, while the International Monetary Fund is also critical of the existing interest rate. –Agencies
