Mr. Zafar Masud Reveals Actual Private vs Govt. Borrowing Numbers
Breaking the myth that government borrowing is crowding out the private sector. The factual position as explained by Zafar Masud is that private credit is half of the total bank deposits. The money that the government borrows from the banks comes from the SBP through OMOs. can the banks refuse to lend the government for budget financing? they can’t..
Mr. Zafar Masud, Chairman of the Pakistan Banks’ Association (PBA), addressed the misconception regarding the size of government funding by banks compared to the industry’s share. He clarified that when the monetary size of money market operations is excluded, the ratio of private sector funding by banks is 50%, which is a very healthy ratio.
He emphasized that 92 to 93% of the government’s fiscal deficit needs are met through financing from banks, as the government cannot borrow directly from the State Bank of Pakistan (SBP). Without this financing from banks, the private sector would struggle to sustain itself due to potential government defaults. He highlighted the delicate equilibrium that exists in this financial relationship.