By: Nawabzada Asad Jawaid

13084

Rise in Private Sector

borrowings

 Private

sector borrowing is picking up

thanks to the rising output of large-scale
industries, increase in domestic
wholesale businesses, revival of
personal loans, and some expansion in
external sector trade.
lending to the private sector would
further gather pace even after the passthrough of monetary tightening on
interest rates in the coming months.

 The

textile and food sectors. Larger-than-expected

output is keeping cotton prices from accelerating.
And that, along with an increase in export demand, is
creating room for textile mills to obtain a bit costlier
working capital.
In the food sector, economies of scale obtained by
some food processing companies and higher
domestic and export earnings of many others
indicate that they wont mind borrowing at higher
rates if they think their business is going to grow
further.

 The

accelerated depreciation in the

rupees value, ,mainly due to an
expanding current account deficit
and dwindling foreign exchange
reserves mixed with heavy external
debt payments, is also playing a role
in keeping the private sectors credit
demand high.

 For

banks, increased lending to

private sector businesses has
become possible because the
government is currently retiring its
commercial bank loans and meeting
most of its budgetary financing
needs by borrowing from the central
bank.

 Generally,

it takes changes in
monetary policy six to nine months
to reveal their impact on banks
lending pattern and loan pricing, as
well as on the private sectors credit
demand. However, according to
central bankers, these changes hit
inflationary expectations a bit
earlier.