Private sector borrowing falls 71pc.

Byline: Shahid Iqbal

KARACHI -- Private sector borrowing in the first five months of the fiscal year declined by more than 71 per cent compared to same period last year.

The latest data released by the State Bank of Pakistan (SBP) showed the private sector borrowed Rs88.1 billion during July-Nov FY20 compared to Rs394.8bn in the same period last fiscal year.

Private sector has shied away from borrowing funds amid high interest rates - 13.25pc - as banks are, in the high interest rate environment, asking returns in the range of 15-20pc on loans.

The high interest rates have damaged the investment environment in the country particularly the industrial sector. The four-month data on the large scale manufacturing (LSM) sector have recorded sharp and consistent declines during the last three quarters.

The LSM during October fell by 7.97pc while during the first four months of current fiscal year declined by 6.48pc.

This decline reflects poor investment climate and low output of the country's industrial sector. The construction industry, which until last fiscal was booming, seems to have lost its attraction particularly for foreign investors. The foreign inflows into the sector fell to just $7.5 million compared to $242.7m in the same period last fiscal year.

The government has been devising strategies to boost the construction industry through launching schemes to house poor segments of the society. However, the rising costs...