Governor SBP, Dr. Reza Baqir presented information on unprecedented growth in housing and construction finance to the Prime Minister yesterday in a meeting of the National Coordination Committee on Housing, Construction and Development (NCCHCD) chaired by the Prime Minister. The meeting was attended by the Federal Ministers for Finance, Information, Aviation, and Climate Change, Chairman NAPHDA, State Minister for Information & Broadcasting, SAPM on Political Communication, Presidents/CEOs of banks and senior SBP officials. The Prime Minister appreciated that efforts of State Bank of Pakistan have been successful in stimulating the housing and construction finance in the country, which was hitherto a neglected area within commercial banks.
During FY21, housing and construction finance outstanding increased by Rs111 billion or 75% over FY20, reaching Rs259 billion by end June, 2021 (see Figure1 below). An increase of this quantum in housing and construction finance in one year is unprecedented in Pakistan’s history. As a result, 97% of the overall target set by SBP for June 30, 2021 was met.
Below is the chart in the SBP press release, alongside the chart created by me using the same figures as in the SBP chart. A 75% growth is nothing to sneer at. That’s why I find it intriguing that SBP felt the need to engage in chart crime to make the point.
Chart Crime
If SBP is saying that targets have been achieved, then we will have to believe it. However, it is disconcerting that SBP is claiming the 97% of target achieved on July 15, 2021, when only a week ago, on July 7, SBP was threatening the banks with a penalty.
The State Bank of Pakistan (SBP) has decided to impose penalty on banks if they fail to meet the mandatory targets for the number of houses and disbursement, said a circular issued on Tuesday.
It appears that the banks are still reluctant to extend loans for the low-income housing projects or houses creating frustration among the government’s top ranks. The government’s prime agenda was to provide 10 million jobs and 5 million low-income houses but after three years, there is no visible sign in this direction.
SBP hasn't released the breakdown of June advances. It will be interesting to see where the growth is coming from because a month ago, i.e. in May, the banks hadn't made any significant progress towards meeting the 5% mandate which is clear from the below chart.
One needs to be wary of the claims made by Reza Baqir / SBP as he has a tendency to massage the numbers to please the PM. This is not the first time SBP is engaging in chart crime. SBP pulled a similar stunt with the same statistic, which I covered in an earlier post.
The data in the April 21 press release of the SBP did not match the data in the economic data released by SBP.
Looking closely at the numbers, it appears that SBP and PBA are over-reporting the numbers by Rs.17 to 22 billion for the last three quarters. Are SBP and PBA fudging the numbers?
There are only two justifications for the difference:
Either a new segment has been included in 2021 which didn't exist till the end of Q4-2020 which makes the comparison not apples-to-apples
or
SBP and PBA are adding arbitrary numbers (fudging) to make their performance appear slightly better than it is.
