KARACHI: Private sector has improved its borrowing record in the first half of the current fiscal but the banks massive investment in treasury bills showed that the advances were much below the requirement of the market.

The private sector has been a victim of government’s borrowing from the banking system providing easy and risk free profits to the banks depriving the private sector to use the funds for growth of the economy.

The State Bank’s half-yearly data shows that the private sector borrowed Rs162.9 billion, which was higher than Rs109 billion borrowed during the first half of the previous year.

Last year, the government made record borrowing from the commercial banks, which succeeded to earn profits and curtailing the ever-increasing non-performing loans.

The banks invested Rs309.5 billion in the government papers last year but the borrowing trend did not change this year despite massive borrowing from the State Bank.

In the first half year the government has already borrowed Rs240 billion from commercial banks. If it keeps the same pace, the government would set new record of borrowing with about half a trillion from the banking system.

The report shows that the government borrowed 32 per cent more than the private sector from commercial banks.

It was observed that banks found it easy to lend money to large corporate sector, while the medium and small size business entities have been paying much higher interest on borrowing.

Bankers said the non-performing loans have reached all time high and could hit even half a trillion rupees by end of this fiscal, which compels them to adopt cautious approach towards advancing of loans.

“We are more concerned over the State Bank`s monetary policy, which always increases the interest rate making the money more costly for the businesses, which ultimately turns into defaults,” said Aamir Aziz, a manufacturer and exporter of finished textile products.

He said instead of facilitating the trade and industry the government is creating hurdles as no strategy is in sight for the betterment of business environment.

Analysts said both the domestic and foreign investments had been falling for last three years mainly on account of non-existence of business-friendly environment and hostile law and order situation across the country. “Investment is not possible unless a `protected opportunity` is provided and this is the primary responsibility of a government,” said Muhammad Imran, a research analyst on investment at a local brokerage house.

He said the foreign investments have flown back and only few sectors are getting inflows as an additional help to keep a profitable venture going.

Most of the analysts see no change in the domestic investment scenario because of prevailing worst law and order situation and higher interest rates.