Shaky private sector keeps retiring debts

The persistent political and economic instability has shaken the confidence of the private sector as its net debt retirement swelled to Rs258 billion during the first quarter of FY24 against a meagre Rs697 million in the corresponding period last year. Data released by the State Bank of Pakistan (SBP) on Wednesday indicated an extremely slow participation of the private sector, which is considered an engine for economic growth. The sharp decline in economic growth from 6 per cent in FY22 to 0.3pc in FY23 reflected the erosion of private sector confidence in the economy. The situation has yet not changed as the World Bank predicted 1.7pc growth for the current fiscal year a clear indication the private sector is no more a key player in economic growth. The State Bank’s data indicates the entire baking system noted net retirement of debts by the private sector. The conventional banks which provided Rs167bn during the first quarter of FY23, noted a net debt retirement of Rs155bn in 1QFY24. The slowdown started in FY23 with poor bank advances to the private sector which brought the economic growth down to almost zero. The credit extended by the conventional banks in the entire FY23 was just Rs211bn compared to Rs1,612bn in FY22.