Businesses prepare for comeback

by Tauqeer Abbas
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Shafaqna Pakistan: A significant slowdown in the spread of Covid-19 in Pakistan has encouraged some local businesses to prepare for comeback as they see light at the end of the tunnel.

Increased borrowing by the short-stay hotel industry, which was hit badly by the pandemic, suggests that it is now working on plans to make an aggressive return to normality.

The short-term accommodation businesses (hotels and others) increased borrowing from banks by over 40%, or over Rs10 billion, in the past two months (July-August) to Rs35.17 billion, according to the State Bank of Pakistan (SBP).

A leading name in the international luxury hotel chains, serving at multiple locations, has announced a brand new 100-room hotel near Jinnah International Airport, Karachi in collaboration with a real-estate developer last week. The hotel is set to welcome guests by August 2022.

The investment comes amid the government’s resolve to develop the tourism sector for international and domestic tourists.

“We are confident that things will improve soon,” an official of a leading hotel said while talking to The Express Tribune.

“Scientists are at advanced stages of introducing a Covid-19 vaccine around the world, which suggests that international flights will resume at full scale and hotels will return to business.”

The breakdown of borrowing by the hotel industry suggests they borrowed more (over Rs27 billion) on a long-term basis apparently to improve accommodation and less to meet day-to-day working expenditures (Rs6.70 billion), according to the central bank.

Similarly, outstanding borrowing by motorcycle manufacturers from banks increased by 12.30%, or Rs1.03 billion, to Rs9.35 billion in the last two months, according to SBP.

The motorcycle sales surprisingly spiked to 300,000 units in July which was unusual compared with pre-Covid-19 sales in any month in Pakistan, according to Association of Pakistan Motorcycle Assemblers (APMA).

“Pakistan’s market for motorcycles is around one million units per year (meaning less than 100,000 a month),” a leading analyst said.

SBP Governor Dr Reza Baqir said the other day (September 21) that growth in motorcycle sales was well backed by the rural (agriculture) economy as flow of extraordinary financing to agronomy during Covid-19 enabled it to spend more. PM Imran Khan has announced Rs280 billion for wheat procurement as part of the government’s relief package worth Rs1.2 trillion for households and businesses to cope with Covid-19, he recalled.

Farmers usually buy new motorcycles at harvesting times every season, it was learnt. Besides, bank borrowing by the businesses delivering essentials, including food (particularly rice), pharmaceutical, fertiliser and mobile phone service providing sectors also jumped significantly during July-August 2020.

For example, outstanding borrowing by manufacturer of basic pharmaceutical products and pharmaceutical preparations surged to Rs73 billion in August compared to Rs61 billion in June.

People also borrowed more (Rs14 billion) to invest in securities and shares of private sector available at the Pakistan Stock Exchange (PSX), the data suggests.

SBP said in its monetary policy statement (MPS) issued on Monday that “in the wake of heightened risk aversion from banks due to the coronavirus pandemic, private sector credit has recently been supported to a significant extent by SBP refinance facilities.”

“These facilities, coupled with other supervisory actions related to deferment and restructuring of loans, have ensured the availability of necessary funding to businesses and households, providing important support to growth and employment.”

However, net credit to the entire private sector decreased by just 1.33%, or Rs82.50 billion, in the two months to Rs6.09 trillion in August, according SBP data.

The sectors which significantly paid-off significant amount in loans during the two months to banks were including wired/landline communication companies, car manufacturers, beverages (including mineral water ones), oil and gas exploration sector, cement and sugar manufacturers.

Express Tribune

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