Bank credit rises on uptick in economy

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Commercial bank credit and bank investments are on the rise in Pakistan on the back of a significant uptick in the economy with 42-year low interest rates of 5.25%, according to a report.

The new monetary policy and the benchmark discount rate, expected to be announced later this week, are likely to strengthen this trend, reported Khaleej Times.

International financial organisations, the ministry of finance and the State Bank of Pakistan (SBP), the central bank, report that the economy is in an expansionary mode and will continue to be so for the next two years.

“We expect gross domestic product (GDP) growth to rise further in the fiscal year 2017. The actual GDP growth in the fiscal year 2016 was 4.7 per cent – a record high for the last 12 years despite international challenges,” said an economist.

According to the SBP, the government envisages a higher GDP growth of 5.7 per cent in fy-17. The banking system will gain further strength and earn larger profits as economic growth increases.

The SBP issued a review of the country’s macroeconomic performance, with a specific reference to the recent monetary policy which ensured a rapidly declining benchmark discount rate and the lowest interest rate of 5.25 per cent charged by commercial banks, a 42-year low.

The report said, quoting IMF, “Pakistan’s economy is growing at its quickest rate in eight years. Investor confidence has slowly returned to a country that was battered by the global financial crisis.”

Bank investments are rising but deposits are not growing that much, reported the SBP. Credit and investments provided by the banks rose in the first half of 2016 compared to the same period of 2015, it said.