The private sector credit growth plunged to 8.82 per cent in April as the business and economic activities in the country came almost to a halt due to the countrywide shutdown imposed by the government from March 29 to contain the spread of coronavirus in the country.
Experts cautioned that the credit disbursement situation might deteriorate further in May as the shutdown was in place for more than two months, affecting all the economic indicators of the country.
The shutdown was withdrawn conditionally from May 31.
Either the businesses lost the financial ability to take loans or opted for going slow until the business environment becomes normal, said bankers.
Many businesses are struggling to repay their existing loans, they said.
In March this year, the private sector credit growth plunged to 8.86 per cent after it dropped to 9.13 per cent in February.
In January, the private sector credit growth
was 9.2 per cent.
Policy Research Institute executive director Ahsan H Mansur told New Age, ‘Actually, businesses might have taken money from the banks only to meet their day-to-day requirement and the loans cannot be considered as investments.’
‘The growth in April this year was calculated based on the 2019 April’s outstanding credit and that’s why it has increased a bit due to the rebalancing and accounting adjustments,’ he said.
‘I do not think that any entity has taken loans in April,’ he said.
Speaking about the revival process, Mansur said, ‘The coronavirus situation must be contained first, otherwise revival measures will not work.’
Even before the outbreak of coronavirus, the private sector credit growth in the country was dismal as businesses were reluctant to expand their business.
Experts said that reviving the trade and investments after the pandemic would be a great challenge.
The country would not be able to attain a desired economic pace after the pandemic if the private sector investment situation remains unchanged, they said.
The pandemic has already resulted in joblessness of a large number of people, they said, adding that the unemployment rate would continue to grow unless adequate investments by the private sector were ensured.
To ensure private investments, ensuring business-friendly policy along with effective implementation of the government-announced stimulus would be vital, they said.
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