Karachi: Bank financing to businesses in the private sector surged to 44% of deposits by October 25, 2024, from 39% at the end of September.
The government has approached the Supreme Court to overturn an Islamabad High Court (IHC) stay order against a 15% additional tax on banks failing to meet a 50% advance-to-deposit ratio (ADR) by December 31, 2024.
According to SBP data, private sector advances increased 11% to Rs13.4 trillion, while deposits declined 3% to Rs30.5 trillion, automatically improving the ADR. The IHC temporarily barred the government from collecting the tax, with a hearing scheduled for December 3.
The government expects Rs100-197 billion in tax revenue from this measure, vital to meeting IMF targets.
Banks have been offering credit at Kibor minus 12%, effectively 3-4%, and are lending to sister companies and trusted clients to meet the December 31 ADR target, which applies for just one day. Borrowers are expected to return funds in early 2025.
The Federal Board of Revenue (FBR) plans to calculate the ADR average for the full year from 2025 onward to ensure consistent financing to the private sector.
Separately, the rupee dropped to Rs278.04/$ in the interbank market, its lowest in two months, due to rising dollar demand for imports. In the open market, it hit Rs278.99/$. Positive news, like $500 million from ADB and $3 billion investment from Azerbaijan, failed to halt the decline.
