http://twitter.com/NidaGulzar92
Business

Banking sector’s ADR improves to 51.8% in December

Banks raised advances to dodge higher taxes linked to ADR non-compliance

avatar-icon

Nida Gulzar

Research Analyst

A distinguished economist with an M. Phil. in Applied Economics, Nida Gulzar has a strong research record. Nida has worked with the Pakistan Business Council (PBC), Pakistan Banks' Association (PBA), and KTrade, providing useful insights across economic sectors. Nida continues to impact economic debate and policy at the Economist Intelligence Unit (EIU) and Nukta. As a Women in Economics (WiE) Initiative mentor, she promotes inclusivity. Nida's eight 'Market Access Series papers help discover favourable market scenarios and export destinations.

Banking sector’s ADR improves to 51.8% in December
The Income Tax (Amendment) Ordinance 2024 would lead to an additional amount of around PKR 70 billion in taxes
Shutterstock

Pakistan’s banks advances have increased to PKR 15.6 trillion as of December 27, which translates into PKR 700 billion worth if lending in a month.

Banking sector advances have increased by 4.7% from PKR 14.9 million as of November end.

However, bank deposits decreased to PKR 30.1 trillion, down 3.3% from PKR 31.1 trillion the previous month.

Consequently, the advance-to-deposit ratio (ADR) increased to 51.8%, up from 47.8% in the prior month, after having bottomed out at 38.4% in August 2024.

Following discussions between bank presidents and government officials, it was decided to abolish the 50% tax on the ADR and to increase the corporate tax rate on banks from 39% to 44% for 2024.

This tax rate is expected to decrease by 1% each year over the next two years, reaching 43% in 2025 and 42% in 2026.

The government anticipates generating an additional PKR 60 to 70 billion from these tax changes to address a revenue shortfall of approximately PKR 386 billion during the last six months of 2024, with total collections of PKR 5.623 trillion compared to PKR 6 trillion in the same period last year.

Furthermore, banks' investments increased by PKR 300 billion, or 1% in a month, totaling PKR 29.3 trillion, with an investment-to-deposit ratio of 97.5%, an increase of 4.3 percentage points.

Comments

See what people are discussing