Private sector borrowing falls by 47pc.

KARACHI -- Private sector borrowing in the first 10 months of current fiscal year fell by 47 per cent to Rs298 billion compared to Rs563bn in the corresponding period last year, data released by the State Bank of Pakistan (SBP) showed on Saturday.

The data revealed both conventional and islamic banks witnessed a large decline in private sector borrowing while the Islamic banking branches of conventional banks showed improvement during the period under review.

The private sector borrowings from conventional banks fell to Rs122.6bn compared to Rs383.8bn in the same period last fiscal year. Similarly, borrowings from islamic banks also fell to Rs52bn against Rs79bn last year.

However, the private sector borrowing from Islamic banking branches of conventional banks increased to Rs122.7bn compared to Rs100bn.

The steep fall in borrowings came after the SBP raised interest rates to 13.25pc to contain the rising trend in inflation. However, since the emergence of coronavirus in March, the interest rates have been brought down by 525 basis points to 8pc.

The high interest rates reduced overall private sector borrowing causing sharp economic slowdown in the country. During the first five months of the current fiscal year, the private sector borrowing plummeted by 71pc to Rs88bn against Rs395bn in the same period last year.

Traders and businesspersons had repeatedly sought major cuts in lending rates, but the SBP ignored their calls with the sole objective of chaining the monster of inflation, which was scaling new peaks.

However, as the pandemic hit the world and contracted demand for goods...