Monetary expansion went down to almost zero per cent in the first five months of this fiscal year, a situation that could be alarming for the economy’s growth.
The State Bank (SBP) reported on Wednesday that the monetary expansion during July to Nov 22 was just 0.03pc, which indicates that a meagre Rs3.1 billion was injected into the economy. The expansion rate was 2.36pc, or Rs208.8bn, during the same period a year ago.
In the wake of falling inflation, higher monetary expansion could boost economic activities but the high interest rate policy practically capped the economic growth.
The SBP slightly reduced the interest rate by 50 basis points to 9.5pc in November but the impact has not become visible so far.
The private sector’s borrowing went down substantially to Rs57bn compared to Rs127bn during the year-ago period which means the economic activity is not picking up.
The government avoided borrowing from the State Bank during the period; instead, the volume of debt retirement was minus 110bn. The borrowing amount was Rs875bn a year earlier.
It is believed that if oil prices continue to fall, inflation could see another cut, providing the government with a chance to ease the interest rate for higher supply of money into the economy.
