LAHORE -  The business community has urged the State Bank of Pakistan (SBP) to review its credit policies to facilitate the private sector, which remained very thin at Rs18 billion against Rs28 billion of last year despite the fact that the government was expecting a better growth rate this year.

They said, “The trend is alarming and a clear barometer of bad financial management of the country, as all the monetary aggregates tell us a sad story of the failure of the authorities.” All Pakistan Business Forum (APBF) President Ibrahim Qureshi, in a media briefing, said that a low volume of private sector credit off-take means lower domestic investment, decline in business activity and economic growth and increase in unemployment.

Quoting the latest figures of the SBP, he said that cash flows of public sector enterprises received a huge battering because credit to them crossed Rs53 billion in the first five months of 2016-17, which was 4.6 times higher than the credit availed a year ago. He lamented the decline in aggregate credit to economy and private sector, as it is very difficult for SME’s to get loans in particular.

The aggregate net credit by banks to the domestic economy registered a sharp fall in the second and first quarter of the year largely due to a significant rise in government domestic borrowing, and the attractive yield of government bonds and treasury bills,” he said.

He said that during the first five months of the current fiscal year, the government has set another record by borrowing more than Rs1 trillion from the SBP as compared to the net retirement of Rs170 billion in the corresponding period of last year. Such a high level of borrowings from the SBP should have reduced the government borrowings from the commercial banks, but the government borrowings from this source also jumped by 78 percent to Rs377 billion up to November, 2016 against Rs211 billion of last year.

Qureshi said that increase in the government’s borrowings from the central bank not only indicates widening fiscal gap between revenues and expenditures, but also shows higher reliance of the government on the central bank for deficit financing due to declining exports.

The APBF president said that the issue of higher credit to PSEs is also serious, which reflects the massive losses being increasingly suffered by the public sector units like Railways, PSM, PIA. Restructuring or privatisation of such units has been promised a number of times, but the government often fails to meet its commitment, he added.