Key Takeaways:
• Auto financing in Pakistan decreased for the 24th consecutive month
• Overall consumer financing dropped by 6.7% year-on-year
• Private sector credit saw a 5.8% annual increase despite consumer financing decline
Automotive Financing Slump Persists
The latest data from Pakistan’s central bank reveals a continued downturn in automobile financing. In June 2024, the sector experienced a 1.0% month-on-month decrease, with financing dropping to Rs230.5 billion from Rs232.79 billion in May. This marks the 24th straight month of decline in consumer transport financing.
Year-on-Year Comparison Shows Significant Drop
When compared to the same period last year, car financing witnessed a substantial 21.5% decrease. In June 2023, auto financing stood at Rs293.73 billion, highlighting the severity of the current slump.
Factors Behind the Decline
Several factors contribute to this ongoing trend:
1. Elevated interest rates
2. Rising vehicle prices
3. Stricter loan acquisition regulations
4. Increased taxes on imported vehicles and parts
Housing and Personal Finance Also Affected
The downturn isn’t limited to the automotive sector. House building finance decreased by 4.1% year-on-year, reaching Rs203.58 billion in June 2024. Personal financing also saw a 5.6% annual decline, settling at Rs238.6 billion.
Overall Consumer Credit Landscape
Total consumer credit disbursement fell by 6.7% compared to the previous year, amounting to Rs802.35 billion. However, there was a slight 0.2% month-on-month increase from May 2024.
Private Sector Credit Shows Resilience
Despite the challenges in consumer financing, overall credit to the private sector grew by 5.8% year-on-year, reaching Rs8.57 trillion in June 2024. This represents a 2.0% increase from the previous month.
Sector-Specific Credit Performance
Manufacturing sector loans increased by 6.6% annually, while construction sector borrowing saw a modest 1.4% year-on-year growth. The agriculture, forestry, and fishing sectors experienced significant credit growth, with a 16.4% annual increase and a 4.1% month-on-month rise.
