Monetary stability and economic recovery.

In a little over six months of this fiscal year (until Jan 8), banks' net lending to the private sector totalled Rs215.5 billion. In full 2019-20, banks had lent only Rs196bn to the private sector. This indicates the economy that shrank at least 0.4 per cent in 2019-20 is well on its path of recovery. Lax monetary policy and targeted concessional financing to the private sector under the government's post-pandemic fiscal stimulus and the State Bank of Pakistan's (SBP) specially designed schemes deserve credit for this positive development.

Signs of economic recovery and a less worrisome inflation outlook have emboldened the central bank to keep its key policy rate unchanged at 7pc for the next two months starting Jan 22.

As domestic demand is growing, not only companies but also individuals are now taking personal loans from banks. In large part though, individuals are using personal loans to fight joblessness and reduced wages. Those who luckily retained jobs even amidst a Covid-19-triggered recession are also borrowing from banks to support jobless relatives and loved ones that don't qualify for bank loans. Pakistan has apparently avoided Stage 3 of 18.53 million job losses projected by the Pakistan Institute of Development Economics (PIDE). It is now trying to contain job layoffs below 12.33m - Stage 2 of Covid-19's fallout.

Thicker inflows of personal loans to address financial hardships can help contain social evils associated with joblessness

That is why the central bank continues to follow an easy monetary policy and the government is also trying to keep its borrowing from banks under check to crate room for private-sector lending. Borrowing by the federal government of Rs950bn between July 1, 2020 and Jan 8 was slightly smaller than what it had borrowed in the year-ago period - Rs990bn. This encouraged banks to lend more to the private sector taking advantage of specially designed concessional financing schemes.

That a broad-based economic recovery is well under way is evident from the fact that the surge in overall private-sector credit demand is not without a matching rise in demand for personal loans.

Between July and November 2020, banks made Rs24.6bn fresh personal loans against that of Rs7.1bn in the year-ago period. The pace of personal loaning accelerated this much also after banks began making concessional loans to financially constrained companies under the SBP's scheme to help them retain employees amidst the...