Home Ferrari 250 GTO Auto Financing Continues to Shrink For 15 months

Auto Financing Continues to Shrink For 15 months

Auto Financing Continues to Shrink For 15 months


In the face of a sharply deteriorating economy, Pakistan’s auto financing sector has been on a continuous downward spiral for the past 15 months. According to data from the State Bank of Pakistan (SBP), there has been a cumulative decrease of Rs95.6 billion, bringing the total auto financing amount to Rs368 billion as of June 2022.

The automotive industry, a vital cog in the country’s economic machinery, is grappling with a myriad of challenges. Frequent plant closures due to delays in opening letters of credit (LCs), dwindling sales caused by skyrocketing prices, regulatory initiatives aimed at curbing demand to address the current account deficit, the imposition of a Rs3 million upper limit on auto loans, and a reduction in the repayment period have collectively contributed to the sector’s woes.

The Hope

However, there may be a glimmer of hope on the horizon. Recent strength in the rupee against the dollar suggests a potential stabilization in car prices. Additionally, the Karachi interbank offered rate (Kibor) has started to descend, a positive sign for auto financing as it is intricately linked to Kibor.

The upcoming meeting of the central bank’s Monetary Policy Committee (MPC) on October 30 looms large as a potential turning point. According to a survey, 70% of participants expect the interest rate to remain unchanged at 22%.

Meanwhile, 16% anticipate a drop of 25-100 basis points, and 11% believe it may plunge by more than 100 basis points. A small but noteworthy 3% foresee an increase of more than 100 basis points.

The declining trend in auto financing might find a reprieve if the car prices stabilize and interest rates experience a downward adjustment. These factors could breathe new life into the sector, offering a silver lining amid the prevailing economic storm.

As stakeholders anxiously await the decisions of the MPC, the future of auto financing in Pakistan remains delicately poised, teetering between recovery and further decline



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