Bank lending to private sector remains negative

The bank lending to the private sector remained negative in the first half of the current fiscal year reflecting a pathetic economic growth scenario. Data released by the State Bank of Pakistan (SBP) on Tuesday showed that the private sector had been retiring its debts from July 1 till Dec 15. The net debt retirement during this period was Rs41 billion compared to net borrowing of Rs141in the same period last year. Bank advances to the private sector took a steep plunge to just Rs208bn in FY23 compared to Rs1,329.7bn in FY22, which resulted in GDP contraction in the year. However, the situation looks more fragile than last year and almost all macro indicators are reflecting a grim economic outlook. The banks are making huge investments in risk-free high-yielding government papers, earning more than 22pc returns.