Mon­e­tary ex­pan­sion reaches Rs543 bil­lion

The Pak Banker - - FRONT PAGE -

KARACHI: Mon­e­tary ex­pan­sion (broad money) reached Rs543 bil­lion dur­ing the first nine months (July-March) of this fis­cal year, an in­crease of Rs73bn over the same pe­riod last year, mainly due to low in­fla­tion and in­ter­est rate. The Con­sumer Price In­dex was at 2.5 per cent in July-Fe­bru­ary 2015-16, pro­vid­ing an op­por­tu­nity for higher mon­e­tary ex­pan­sion. The State Bank of Pak­istan (SBP) re­ported on Tues­day that the cur­rency sup­ply dou­bled to Rs512bn dur­ing July-March 2015-16 from Rs283bn in the same pe­riod last year. Net do­mes­tic as­sets (NDAs) of the banking sys­tem in­creased by 3.95pc to Rs413bn as com­pared to the growth of 3.56pc in the same pe­riod last year, which showed higher amount of money is reach­ing the econ­omy.

Net for­eign as­sets (NFA) re­mained al­most the same as it was last year. The main growth was due to a mas­sive bor­row­ing by the fed­eral gov­ern­ment which reached Rs972bn in Ju­lyMarch 2015-16 as com­pared to Rs1.113 tril­lion in the same pe­riod last year. But the gov­ern­ment ben­e­fited by re­tir­ing less debt to the SBP this year as com­pared to the pre­vi­ous year.

On the other hand, the credit off-take by the pri­vate sec­tor in­creased by 87pc, which helped NDAs to grow while mon­e­tary ex­pan­sion in­creased sub­stan­tially dur­ing the pe­riod un­der review. Ex­perts said that higher mon­e­tary ex­pan­sion un­der low in­fla­tion would bring higher eco­nomic growth. Re­cently, Fi­nance Min­is­ter Ishaq Dar said that the gov­ern­ment was aim­ing 5.5pc eco­nomic growth in FY16. In 2014-15, the econ­omy grew by 4.24pc, which was a seven-year high.

How­ever, re­cent re­ports sug­gested that the flow of funds for pub­lic-sec­tor de­vel­op­ment was much lower than the pre­vi­ous year, which ham­pered the de­vel­op­ment pro­grammes and would ul­ti­mately slow the growth rate.

The only hope that may prove a cat­a­lyst was the pri­vate sec­tor's par­tic­i­pa­tion. Though the credit off-take in­creased, the size of to­tal credit was much lower than the bor­row­ing size of the gov­ern­ment. For eco­nomic growth, higher par­tic­i­pa­tion of pri­vate sec­tor is re­quired.

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