Private sector credit jumps in August

• Signals surging economic activities
• Outstanding credit to the private sector by the commercial bank had expanded by a mammoth Rs.135.2 billion in August

Credit to the private sector which is used as one of the key barometers to determine the health of the economy grew at a brisk pace in August from a month ago, continuing the months-long growth in credit to the real economy.

The latest data from the Central Bank showed that the outstanding credit to the private sector by the commercial bank had expanded by a mammoth Rs.135.2 billion in August suggesting that the banks have opened their lending spigots wide open after remaining somewhat cautious during the first half of the year or so. In nominal terms, August credit expansion came in as more than twice as much as Rs.60.2 billion in July, taking the total eight months credit to Rs.341 billion. On a year-on-year basis, this translated into a robust 8.7 percent growth, which is more than a mid-single digit level growth forecasted by many.

This also helped to expand the money supply as measured by broad money or M2b by 9.3 percent through August from a year ago levels.

The economic growth is also broadening as seen from the second quarter Gross Domestic Product growth which showed all key economic activities expanding, including manufacturing which contracted for a prolonged period.

The second quarter gross domestic product grew by 4.7 percent, bringing the first half of the year’s growth to 5.0 percent, prompting the Central Bank to reforecast a higher growth estimate for 2024 from the one before.

The Central Bank left key policy rates unchanged at the current levels as they became sufficiently convinced that their previous policy easing measures are working well through the economy by way of continuously declining lending rates, rising credit to the private sector and the continuous growth in the economy.

All data show that the National People’s Power which received a resounding mandate at the Presidential election last weekend inherited a robustly recovering economy as opposed to the previous two presidents, one of who had to battle a global pandemic during his entire term, shorted to two and a half years before he was chased out while the other oversaw some tough to swallow economic reforms in the last two years before he was voted out.