Credit to private sector falls by 47 per cent

Credit to private sector falls by 47 per cent Private sector credit off-take in 7MFY09 fell to Rs. 140 bn against Rs. 264 bn in the same period last year. The decline in private sector credit off-take can be attributable to the tight policy stance adopted by the central bank which significantly raised the weighted average lending rates.  During more than seven months, the broad money (M2) growth was just 1.48 per cent compared to 6.17 per cent during the same period last year. Since the inflation is still above 20 per cent and unemployment is on rise, the economy looks to enter into the state of stagflation. This is a stage when an economy has high inflation rate along with high unemployment. SBP estimates economy to grow by 3.7% this fiscal but the steep fall in the credit supply to private sector shows that the economic growth might fall further as some independent economists say the GDP growth could be around 2 to 2.5%.