The State Bank of Pakistan (SBP) Wednesday released a study on "Sources & Uses of Funds by Non-Financial Private Corporate Sector in Pakistan." The study measures the contribution of non-financial private corporate sector to the flow of funds in the economy and also analyzes financial and non-financial behaviour of the corporate sector.
The study is based on sectoral balance sheet of non-financial private corporate sector using data published in annual reports of the corporations. The study is presented in two parts. First part of the report explains structure of the sources and uses of funds by the corporate sector; the second part summarizes the saving investment gap and channels of financing it.
The main objectives of the report are to build comprehensive quality statistics to capture trends of corporate activities in financial and capital markets and to understand the broad structural features of the non-financial private corporate sector for policymakers, researchers, business community and other interested users. To analyze trends in capital formation and its impact on expansion in general employment and identify the sources and uses of funds of non-financial private corporate sector To assess the effects of monetary policy actions with reference to financial and real investment in the sector and determine the origin and causes of saving investment gap and how to finance it.
The data for the study was plucked from annual accounts of joint stock companies listed at the bourse and some companies having foreign investment as on June 30, 2015. According to the study, the balance sheet of corporate sector comprises financial and non-financial assets, liabilities and shareholder's equity. The consolidated sectoral balance sheet for FY15 had 57.19 percent non-financial assets and 42.81 percent financial assets. About 42.11 percent of total assets in the corporate sector were financed by shareholders equity. The remaining assets were financed 30.13 percent through non-current liabilities and 27.76 percent by current liabilities.
There are two major types of funds for financing of non-financial private corporations. Some funds are generated within the sector through savings and others are acquired from other sectors of the economy (externally generated funds). Regards to funds from internal sources, at the start of FY15, total internal funds in the form of shareholders equity and provisions (non-financial saving) of corporate sector were Rs 8,255.2 billion of total funds. An increase of 11.92 percent or Rs 983.8 billion was noted during the review period and its share in total funds generated by the private corporate sector was 60.18 percent in FY15.
The non-financial private corporate sector relied significantly on external sources of funds. The data revealed that the external sources of funds constituted up to 39.82 percent of the total sources. Borrowing was the major source of acquiring funds and constituted 21.24 percent of total external funds raised by the non-financial private sector during FY15.
Total external funds increased by Rs 137.6 billion or 2.30 percent from Rs 5,974.6 billion to Rs 6,112.2 billion during FY15. Other financing increased by 9.19 percent from Rs 1,385.8 billion to Rs 1,513.2 billion during FY15. On the other hand, trade credits decreased by 9.24 percent from Rs 1,194.7 billion to Rs 1,084.2 billion during the year.
Relate to uses of funds, the investment of non-financial private sector generally has two main components including investment in financial assets and non-financial assets, ie, gross capital formation.
Gross capital formation had the largest share of 57.19 percent in total uses of funds during FY15. While non-financial private corporate sector used 42.81 percent of its sources for the acquisition of financial assets, including currency & deposits and it increased by 13.24 percent from Rs 2,952.2 billion to Rs 3,343.0 billion by the end of FY15.