The private sector credit, which showed a net retirement of Rs 4 billion during the first quarter of FY08, grew to over Rs 60.5 billion on November 3, 2007, compared with over Rs 38 billion on October 27, 2007, and to a hefty amount of Rs 83.6 billion in the comparable period of last year.
Public sector enterprises (PSEs), which on October 28, 2007, had managed to pay back Rs 5.7 billion to banks and availed fresh credit in the amount of some Rs 0.85 billion on October 27, 2007, again went on retiring credit in the current week, amounting to some Rs 74 billion. PSEs were reported to have retired over Rs 6 billion in the corresponding period of last year.
On the other hand, government sector borrowing, which was entirely responsible for monetary growth of Rs 58 billion in the first three months of the new financial year, continued growing further in the subsequent period to reach Rs 80 billion on October 27, 2007, and further to Rs 110 billion on November 3, with budgetary borrowings of the government, by and large inflationary in nature, having risen to Rs 93 billion the previous week-end and to well over Rs 126 billion on November 3.
The visible moderation in overall government borrowing originated from the commodity procurement sector where government had retried about Rs 12 billion to banks up to October 27, 2007 and close to Rs 15 billion by November 3, which in the present context appeared to be the result of unloading of wheat from government silos to the flour mills to arrest unprecedented hike in wheat prices.
Further break-up of budgetary borrowing showed that more than 65 percent of all government borrowing came from scheduled banks' participation in 3-month, 6-month and 12-month auctioning of government securities by the State Bank of Pakistan. The remaining 35 percent came from the central bank, and mostly represented its operations in the secondary market.
As a result of above-mentioned developments in the government and non-government sectors money supply should have grown to well over Rs 170 billion but for the drawdown of Rs 34 billion of net foreign assets (NFA) and a show-up of Rs 36 billion of net liabilities under Other Items (Net) or OINs of the banking system, actual monetary expansion was restricted to about Rs 100 billion or 2.5 percent during the new financial year to November 3, 2007 compared with Rs 74 billion, or 2.2 percent, in the comparable period of FY07. Nearly 87 percent of all fresh money creation consisted of currency in circulation, while the remaining 13 percent was accounted for by deposit money. (Report by research.dept@aaj.tv)