Gulf banks must boost private sector loans

Dubai: Gulf economies must boost bank lending to the private sector while helping the regional banks and private sector firms to strengthen their balance sheets, the International Monetary Fund said in a report yesterday.

"The short-term priority remains the buttressing of the financial sector without unduly constraining the availability of credit," the IMF report said. Despite the strong fundamentals, the weighted average non-performing loans to total loans in the region have almost doubled, increasing from 2 per cent at end-2008 to 4 per cent at end-2009. According to the IMF, a combination of factors such as an overall decline in funding resulting from slow deposit growth and tight access to external borrowing has reduced lending capacity.