KARACHI - The growth in private sector credit off-take by the schedule banks has steeply dropped by 34 per cent during July-January FY09 due to slowdown in the demand of working capital loans and fixed investments from the corporate sector. The private sector credit disbursement from the scheduled banks has declined by 85 billion rupees from July to January, 2008, depicting a strong contraction in credit demand from the corporate and industrial borrowers on account of deceleration in the share of trade financing in private sector advances of the banking sector. The domestic banks disbursed Rs 155 billion from July 1 to January 10, 2008 as against Rs 240 billion of last fiscal. However, credit to public sectors enterprises (PSEs) sharply increased by 49 million rupees during Jul-Jan FY09 as continuing delays in settlement of claims by the government has pushed the major power utility and the oil marketing company in public sector to seek finance from scheduled banks. The credit expansion by the banks to the PSEs surged to Rs 58.438 million as against Rs 9.498 million during the corresponding period of last year. According to SBP monetary aggregates for the reviewed period of July-January 2008, the net federal government's borrowings soared to Rs 288.9 billion as against Rs 213.8 billion in the same period of FY08 while the aggregate M2 growth dipped by -0.93 percent over 6.40 percent of previous fiscal. The budgetary-related borrowings of the federal government have shoot up to 278 billion rupees from July to January of current financial year. From July-January 10, 2009, the budgetary borrowings of the federal government saw an increase of 35 billion rupees as against such borrowings from the same period of last fiscal. In last financial year the budgetary borrowings of the center amounted to 241 billion rupees during the said period. The government borrowed Rs 298 billion from the SBP for budgetary support during Jul-Jan FY09 as against Rs215 billion in last fiscal. According to the monetary survey from July 1 to January 10, 2008, Net Foreign Assets of banking system showed negative growth whereby NFA amounted to Rs -299 billion compared to Rs -142 billion. The reduction in NFA of banking system has been the result of widening external current account deficit. On the other hand, Net Domestic Assets stood at Rs 343 billion during the period under review from Rs 402 billion in FY08 witnessing sharp deceleration in NDA growth of the banking system. It is worth noting here that the private sector credit off-take witnessed an unusual break in credit cycle during 2008 unlike previous year as credit demand could not maintain its momentum after September 2008, on account of liquidity strains of banking system.