Credit drawdown quadrupled in July-December: SBP report – Newspaper

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KARACHI: Credit to the private sector almost quadrupled year-on-year in the first six months (July-December) of the previous financial year, the State Bank of Pakistan said in its semi-annual report on Friday. the state of the Pakistani economy. .

The report indicates that this is mainly due to working capital requirements which have increased due to the increase in domestic demand, the increase in exports, as well as the increase in world prices of raw materials and the resulting rise in domestic wholesale prices in July-December 2021-22.

The report notes that soaring global commodity prices, coupled with growing domestic demand, especially for industrial inputs, have led to a widening current account deficit, despite double-digit growth in workers’ remittances to $15.8 billion in 1HFY22.

Exports increased significantly in the first half, despite some deceleration in the second quarter. Higher unit prices and export volumes contributed to export growth with a year-on-year increase of $3.4 billion in 1HFY22 to $15.2 billion – “which is the result of highest ever semi-annual export,” according to the report.

“However, despite slightly slower import momentum in the second quarter, 1HFY22’s increase in imports was almost four times greater than the increase in exports,” the report said.

In addition to rising global commodity prices, import growth was driven by strong demand for commodities and capital goods; Supply of Covid vaccines; and the continued need to import wheat and sugar to fill domestic supply gaps, he said.

“Amid a widening current account deficit, the market-determined exchange rate depreciated by 10.7% in the interbank market during 1HFY22,” the report said.

The State Bank’s foreign exchange reserves remained relatively stable until the end of 1HFY22, supported by an inflow of $1 billion from the issuance of Eurobonds, the additional allocation of 2.8 billion in SDRs from the IMF in the first quarter and bilateral deposits of $3 billion from Saudi Arabia in the second quarter.

The report adds that the confluence of more expensive imported products (such as edible oil and pulses) and some demand-side pressures pushed national CPI inflation into double digits during 1HFY22, the surge. non-perishable food prices more than offset lower perishable food prices. The increase in world commodity prices also led to upward adjustments in the administered prices of gasoline, LPG and electricity.

The strength of the economy, general inflationary pressures and widening current account deficit necessitated a cumulative increase of 275 basis points in the policy rate during 1HFY22.

“This was aimed at ensuring the sustainability of economic growth and the external account, as well as anchoring inflation expectations,” the report said.

On the fiscal side, the overall deficit remained unchanged in 1HFY22 at last year’s level of 2.1% of GDP. However, the primary balance tightened to 0.1 pc of GDP in 1HFY22, from 0.6 pc in the same period last year, as higher non-interest spending more than offset the sharp rise in tax revenue .

Posted in Dawn, August 13, 2022

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