Banking system: borrowing for budgetary support declining

The government's borrowing for budgetary support from the banking system is declining as it stood at Rs 45.64 billion on April 29 against the target of Rs 98 billion for the FY 2005-06. It is worth mentioning that from July 1, 2005 to March 4, 2006, it stood at Rs 155.59 billion, which was 58.76 percent higher than FY 2006 limit.
The State Bank of Pakistan's (SBP) second quarterly report released a month back also quoted that the larger government's borrowing was due to increased expenditures on account of earthquake relief activities and the shift in composition of budgetary finance.
It said that specifically, 54.2 percent of the full FY05 estimates of external finance were realised during the first half of FY05 as the disbursements of loans from ADB and IDB and the receipts against the issuance of Sukuk Bonds were realised during the period. This allowed the government to retire banking sector borrowings.
In contrast, during first half of FY06 external finance receipts have been quite low, with 32.7 percent of the full year estimates being realised. As a result, the government borrowings from the banking sector have increased sharply, breaching the full year target by end-February 2006.
The latest data issued by the SBP reveal that the government's net borrowing for budgetary support from banks (scheduled and central) during July 1 and April 29, 2006 stands at Rs 45.64 billion.
According to the break-up of the data, the central government's net borrowing rose to Rs 59.56 billion between July 1, 2005 and April 29, 2006, from Rs 27.31 billion, borrowed from SBP and commercial banks in corresponding period last year. However, the provincial governments retired Rs 13.92 billion during the period under review against Rs 19.34 billion retired during the corresponding period last fiscal.
The data further reveal that the central government borrowed Rs 57.47 billion from SBP as against Rs 138.77 billion last year. From scheduled banks it borrowed Rs 2.01 billion. The bank further says that the provincial governments during the period borrowed Rs 332 million from the scheduled banks. During the same period last year they retired Rs 9.39 billion of scheduled banks. They retired Rs 14.25 billion of the central bank as compared to Rs 9.95 billion retired during the same period last fiscal.