The main reason for overall decline in Pakistan’s private sector credit take-off is that, the flow of bank credit has been slow for the textile sector. According to a banker, “The textile sector is not borrowing aggressively though the cotton arrival is at the peak”. This has already started producing negative impact as it is seen the industrial production fell sharply in the very start of the fiscal year 2005-06. The first quarter credit off-take by the private sector fell by over 40 per cent reflecting a slow growth. According to the bankers the textile sector has enough raw cotton in its storage; it was only playing with cotton prices as an effort to bring the prices down. It was expected that, by the end of this November the textile sector should have borrowed additional Rs15 to Rs20 billion. Bankers who deal with the textile sector were not aware about the exact borrowing by the sector, but said that the first quarter report showed very low flows of liquidity towards the sector. October and November are the traditionally high credit consuming months because of higher arrivals of cotton in this period.
Mr. Abdullah Jamil, a textile miller said, “We should not compare the credit off-take of the
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| last year by the textile sector because that year had produced record cotton production of over 14 million bales”. Last year the private sector consumed record credits and textile sector was the highest among the borrowers. This year at the end of June 2005 the textile sector has borrowed Rs. 80 billion which is 30 per cent higher that the preceding year. It was the highest borrowing after personal loans which were Rs. 90 billion. The analysts said that the slow growth of credit flows towards the private sector was also the impact of State Bank’s tight monetary strategy. The slow take-off has also affected the income of the banks which earned high profits last year. The State Bank has been trying to curtail the inflation and keep the inflation within its target of 8 per cent for the current fiscal. During the last four months, the monetary growth has been almost zero. According to some analysts the lower credit off-take by the private sector could hamper the government’s effort to achieve higher economic growth. The State Bank in its annual report has predicted a lower than target economic growth.
Last year textile was the largest participant in the growth of large-scale manufacturing sector (LSM) and posted a 24.7 per cent growth to achieve the over all 15.6 per cent increase. 
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