Government borrowing shrinks to Rs 43 billion

Net government borrowings during the week ended April 1 squeezed to Rs 43 billion from Rs 128 billion the previous week while private sector borrowings surged to Rs 353 billion from Rs 340 billion a week ago. This was revealed by the SBP update of the monetary profile of the country released on April 20.
Data on government borrowing showed that budgetary borrowing which was about Rs 161 billion on March 25 came down to Rs 76 billion, very much within the whole year target of Rs 98 billion.
Credit under commodity operations and other heads remained at previous week''s level indicating credit retirement of about Rs 33 billion.
This decline in government borrowing was directly the result of government sale of $1.3 billion to the State Bank (being the proceeds of sovereign dollar bonds and receipts against PTCL sell-off) creating a big chunk of rupee revenue for the government.
As a result, budgetary borrowings reduced to Rs 79 billion on April 1 compared Rs 146 billion on March 25. Provincial governments borrowing, at the same time, declined from Rs 15 billion on March 25 to a net retirement of about Rs 3 billion on April 1.
On the other hand, credit expansion in the private sector soared to Rs 353 billion exceeding the full-year credit target of Rs 330 billion by Rs 23 billion as on April 1.
A week ago, private sector utilisation of bank credit had reached Rs 340 billion. Credit to PSEs also rose to about Rs 3 billion against a net retirement of Rs 10 billion provided in the credit plan.
However, the SBP credit to NBFIs squeezed by well over Rs 1 billion against a provision of nil credit expansion during the entire financial year (July 2005-June 2006). While all these developments on the credit side could have pushed up money supply to Rs 310 billion but because of a net draw-down of about Rs 20 billion on account of net foreign assets of the banking system, actual money supply increased by a lower amount of Rs 290 billion during the year so far (July 1, 2005 to April 1, 2006) about Rs 9 billion higher than on March 25.
Expansion in the private sector credit happened to be the main driving force of expansion in money supply.