11MFY11 credit expansion at 13%

11MFY11 credit expansion at 13%: Credit expansion stood at 13% during 11MFY11, (11MFY10: 11.4%), as growth was witnessed mainly in Govt borrowing which captured 78% of the credit expansion in 11MFY11.

GoP continues to be the mainstay of credit expansion: Credit expansion in government sector increased by 184bps to 23.9% or PKR579bn (78% of total credit expansion) during 11MFY11. Borrowing of massive PKR245bn came in the month of May-11 alone for budgetary support.

Private sector continued its downhill journey: Private sector lending declined by PKR36bn on MoM basis and stood at PKR177bn during 11MFY11. The 11MFY11 private sector credit expansion at 6.45% is up significantly from last year’s 3.7%. Consumer financing shed PKR20bn during 11MFY11 as compared to a decline of PKR41bn in the same period last year.

Outlook: In the high interest rate environment banks remain vigilant in fresh lending to private sector as they prefer investments in government securities due to low risk appetite.  Schedule banks deposit have approximately increased by PKR646bn (14%) during 11MFY11 while incremental lending to private sector has only been PKR177bn.

11MFY11 credit expansion increased to 13%

Credit expansion stood at 13% during 11MFY11, against 11.4% in 11MFY10. Growth was witnessed mainly in Govt borrowing which captured 78% of the credit expansion in 11MFY11.  In the non government borrowing, private sector  credit improved while PSEs and personal financing witnessed decline in stock.

GoP continues to be the mainstay of credit expansion

During 11MFY11 credit expansion in government sector increased by 184bps to 23.9% or PKR579bn which was 78% of total credit expansion compared to PKR441bn (75% of total credit expansion) in the same period last year. A massive PKR245bn was borrowed alone in the month of May-11 for budgetary support, which was approximately 2.4x of PKR101bn  borrowed in May-10.

Private sector continued its downhill journey

Private sector lending continued to be the major contributor in non Govt borrowing with share of 84%. Private sector incremental credit offtake stood at PKR177bn during 11MFY11, while on MoM basis it declined by PKR36bn. The 11MFY11 private sector credit expansion at 6.45% is up significantly from last year’s 3.7%. Consumer financing dropped by PKR20bn during 11MFY11 as compared to a decline of PKR41bn in the same period last year. The PSE’s credit offtake declined by PKR26bn (- 6.1%) during 11MFY11 compared to an increase of PKR64bn (+ 18.3%) in the same period last year.

Outlook

Banks remain vigilant towards fresh lending in the current high interest rate environment as they prefer investments in government securities due to low risk appetite. Schedule banks deposit have approximately increased by PKR646bn (14%) during 11MFY11 while incremental lending to private sector has been PKR177bn only.

Economic & Political News

IPPs withdraw notices: government pledges to make payment by June 28

The four Independent Power Producers (IPPs) decided to withdraw sovereign guarantee notices served on the Government of Pakistan (GoP) after a brainstorming session with the Minister for Water and Power, Naveed Qamar.
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