Auto financing in Pakistan declines for 22nd consecutive month

WEB DESK: Automobile financing in Pakistan has declined to Rs235.69 billion in April 2024, reflecting a 1.56 per cent month-on-month decrease from Rs239.44 billion in March 2024, according to the latest data released by the State Bank of Pakistan (SBP).

This marks the 22nd consecutive month of declining car financing in the country. Year-on-year, the drop is even more pronounced, with a 23.75 per cent decrease from the Rs309.1 billion recorded in April 2023.

The decline is primarily attributed to higher interest rates, rising car prices, stringent loan acquisition regulations, and increased taxes on the import of automobiles and their parts.

In other sectors, consumer financing for house building stood at Rs205.93 billion by the end of April 2024, showing a 3.34 per cent year-on-year decrease. However, on a month-on-month basis, house building financing saw a slight increase of 0.08 per cent from Rs205.76 billion in March 2024.

Personal use financing also saw a decline, registering at Rs238.1 billion, down by 4.81 per cent year-on-year and 1.63 per cent month-on-month. Overall, consumer credit disbursement decreased by 7.51 per cent year-on-year to Rs802.62 billion, with a month-on-month decline of 0.56 per cent from Rs807.13 billion in March.

Despite the downturn in consumer financing, the SBP data revealed a 1.48 per cent year-on-year increase in outstanding credit to the private sector, which reached Rs8.38 trillion in April 2024. However, on a month-on-month basis, private sector loans saw a slight drop of 0.29 per cent from Rs8.41 trillion in March 2024.

Within the private sector, loans to the manufacturing sector rose by 2.76 per cent year-on-year to Rs4.81 trillion, though this figure represented a 0.5 per cent month-on-month decrease.

These trends indicate a challenging economic environment, influenced by fluctuating interest rates, regulatory changes, and broader economic pressures. The ongoing decline in automobile financing underscores the need for strategic interventions to stabilise the market and support consumer demand.

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