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Credit expansion falls by Rs 12bn in 7-months

TAHIR DHINDSA

ISLAMABAD: Total credit expansion during the first seven months of the current fiscal year remained at Rs 30 billion, as compared to Rs 42 billion of credit disbursed during the corresponding period of last year, top official sources told Business Recorder on Saturday.

To salvage the situation the government has principally decided to further cut interest rate by another two percent.

There is a proposal also to further reduce profit on national saving schemes, but the exact percentage cut of the instrument has not been decided yet.

Rs 12 billion less credit disbursement during the first seven months of fiscal year 1999-2000 as compared to the corresponding period of the fiscal year 1998-1999 have been pinned to three main reasons by the economic managers of the country. And, they believe that despite the fact that that almost a quarter of the running year has been lost, still the gap would be bridged as industrial activity is improved as a result of the economic policies of the current government.

Sources said, in Pakistan, usually the industry retires its outstanding debt in first two weeks of September, and next cycle of fresh credit disbursement starts during the third week of September. The period ends in October. Political unrest and ethnic killing was at its top at that time. Soon after, October 12 change over of the federal government ministry of finance did not work for more than a week and the industry was observing the change, sources said.

Then soon after its coming to power, the new government promised to cut interest rates. The industry kept on waiting for the interest rates to come down, and little credit was disbursed during all this time, they maintained.

The government has now formulated its economic policy and there is a political stability in the country as well, it is expected that credit disbursement will pick-up, they claimed.

To synergise the process further cut in interest rates on credit and rate of return on savings has been proposed. The government will shortly announce other measures to boost industrial activities in the countries, which will also expand credit to a reasonable limit, sources concluded.