27 October 2013

Shipbreaking gets large liquidity:

KARACHI, Oct 26: Shipbreaking industry showed hyper activity within first three months of the new government.

A report issued by the State Bank showed that credit off-take by the shipbreaking industry shot up between July and September.

Overall manufacturing sector showed no signs of improvement. Instead, a significant decline was visible in their credit off-take from the banking industry during the quarter.

According to the State Bank, credit off-take by ship-breaking industry rose by Rs3.5 billion to Rs18.245bn till end September, 2013.

However, credit off-take by the entire manufacturing sector witnessed a sharp decline of Rs26bn to Rs1422bn, reflecting poor state of economy and disappointing manufacturing sector growth.

Since the inception of the new government, it was widely expected that Prime Minister Mian Nawaz Sharif would wake up sluggish economic activities with some new ideas and new economic policies, but so far no strategy has been introduced at the highest level.

It was not known to bankers why liquidity suddenly started floating towards the shipbreaking industry.

However, informed sources said that the new government is interested in seeing the shipbreaking industry flourishing like it had been in the past.

The bankers had no reasons for other sectors to be ignored by the banking industry.

The most important sectors, like textile, have yet not shown willingness to improve their performance.

According to the State Bank, textile sector which is largest consumer of banking loans (now mostly for working capital) added only Rs328 million in three months in their total loans worth Rs515.230bn.

The textile industry has been crying over higher interest rate when the State Bank increased the interest rate by 50 basis points to 9.5pc last month.

Since the cost of production has risen significantly due to massive devaluation of local currency, exports could see a dent during the current fiscal year. Textile exporters use up to 30pc imported constituents for their exportable products.

Another important industry of footwear noted a decline in the credit off-take by Rs544m during this period.

However, for the first time during the last 100 days since beginning of new fiscal year, private sector borrowed Rs14bn from the banking sector.

According to another SBP report, private sector’s net borrowings in the last fiscal year were minus Rs19bn which means private sector kept retiring debts in FY-13.

Source: Dawn. 26 October 2013

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