Maaz Mahmood says govt uses taxpayers\u2019 money to pay heavy returns to banks
\n Islamabad
\nThe All Pakistan Business Forum (APBF) has stated that the government has been using taxpayers\u2019 money to pay unprecedented returns to the banks, urging the central bank to review its policies to facilitate the private sector, as the massive investment in government papers leave little room for lending to the private sector.
\nThe APBF President Syed Maaz Mahmood suggested that banking in Pakistan could not stimulate the economy. Instead, the banks have been making money by investing in government papers, and the government retires its debt with taxpayer\u2019s money. The government has always been quick to impose new taxes for higher revenue collection, but there is no check on spending.
\nHe said that the banks\u2019 investments in government papers reached Rs26 trillion by December 2024, contributing 57.6 percent to the central government\u2019s domestic debt.
\nAPBF Chairman Ibrahim Qureshi said it\u2019s not new that the government borrows from banks but the size of banks money has been increasing as domestic debts. The data also showed that the banks had been making record profits by getting high interest rates, like 22 per cent during the entire FY24, while the return on T-bills remained around this rate and sometimes even higher than the policy rate.
\nMoreover, the government borrowing from the SBP also increased by record highs during the period, increasing inflationary pressures on the economy.
\nIbrahim Qureshi observed that private sector has found no space to borrow from financial institutions, as banks prefer to park their money in risk-free government securities in huge sums. He said that banking money\u2019s flow has now directed towards the government papers, which will definitely hit the economic growth adversely, affecting the investment landscape of the country too.
\nThe APBF President was of the opinion that the government\u2019s shift for borrowing from the central bank to commercial banks will likely result in banks making profits however this would hurt overall economic growth.
\nThe State Bank of Pakistan\u2019s latest data shows the that a low volume of private sector credit offtake means lower domestic investment, hindering business activity and economic growth and promoting unemployment in the country. He added the trend is alarming and a criteria of bad financial management of the country, as all the monetary aggregates tell us a sad story of the failure of the authorities.
\nThe off take at the beginning of last financial year was much higher than the preceding year but disappointing economic situation along with the higher rates discouraged the private sector from borrowing additional funds during the later months. The central bank had justified massive rate hikes throughout the fiscal year citing rising inflationary pressures.
\nWith weaknesses in private capital inflows continue to persist, the Central Bank should cut policy rates to spur growth, as cut would infuse confidence in the business community and propel economy. The industry is expecting the cut in interest rate, which could help boost private sector growth.
\nSyed Maaz Mahmood said this massive investment in government papers left little room for lending to the private sector. However, in the second quarter of the current fiscal year, the banks had to increase lending to meet the advance-to-deposit ratio limit to avoid the 15 incremental tax imposed by the federal government. The banks suddenly increased their lending to the private sector, which reached around Rs1.3tr; now, this lending size is shrinking. To avoid tax on lower ADR, the banks lent Rs1.3tr to the non-banking financial institutions (NBFIs) as short-term lending.<\/p>\n","protected":false},"excerpt":{"rendered":"
Maaz Mahmood says govt uses taxpayers\u2019 money to pay heavy returns to banks Islamabad The All Pakistan Business Forum (APBF) has stated that the government has been using taxpayers\u2019 money to pay unprecedented returns to the banks, urging the central bank to review its policies to facilitate the private sector, as the massive investment in […]<\/p>\n","protected":false},"author":2,"featured_media":439759,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-461808","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"yoast_head":"\n