Government budgetary borrowing rose to Rs 73.4 billion on 14th October compared with Rs55.7 billion a week ago. Both Federal government and the provincial governments contributed to nearly Rs 18 billion increase in the government budgetary borrowing during the week.
Federal government's budgetary borrowing rose by Rs 7.6 billion to Rs 59 billion while that of provincial governments rose by Rs 10 billion to Rs 14.4 billion. Entire fresh borrowing came from scheduled banks in the case of Federal government as their net debit balance (borrowings minus deposits) with the Federal government improved from Rs 33.6 billion to Rs 20.6 billion being mainly the result of T Bill Auction held on 11th October in which the State Bank realised, on behalf of the Federal government, Rs 15.4 billion from scheduled banks at a weighted average yield which had remained unchanged since the auction held on 30th August at 8.6417 percent, 8.8142 percent and 9.0046 percent for 3-,6-, and 12- month bills.
During the same period, the federal government's indebtedness to the central bank stood reduced by Rs 5.4 billion (represented by an increase of Rs 2.6 billion in SBP's holdings of T-Bills/securities entirely offset by a reduction of Rs 7.8 billion in government deposits with it) to Rs 79.6 billion while that of provincial governments' increased by over Rs 10 billion (reflected by an increase of Rs 1.2 billion in their debtor balances and a drawdown of deposits of Rs 8.9 billion with it) to Rs 15.4 billion.
In the meanwhile, the government borrowing for commodity operations declined from Rs 7 billion on 7th October to Rs 5.6 billion on 14th October. Government credit expansion on account of utilisation of Zakat and privatisation proceeds etc, also squeezed from Rs 0.3 billion on 7th October to minus Rs 0.5 billion on October 14, indicating an increase of un-utilised funds under these heads by Rs 0.8 billion during the week. Thus overall government borrowing during the week rose from Rs 63 billion on 7th to Rs 78.5 billion on 14th October.
On the other hand, private sector credit, which grew to Rs 29.4 billion during the first quarter of FY07, has continued growing since then albeit slowly. On October 7, it had grown to Rs 30.6 billion, recording a growth of only Rs 1.2 billion over previous week.
A week later, the growth turned out to be Rs 6 billion on October 14 with overall credit expansion in the sector rising to Rs 36.6 billion during the year, compared with the overall expansion of Rs 73.4 billion in the corresponding period of last year. Specialised credit to the private sector also increased from Rs 1.3 billion on September 30 to over Rs 4.6 billion on October 7 though it decelerated to Rs 4.1 billion on October 14.
The whole scenario, apparently, indicates somewhat slower economic activity this year than in the corresponding period of last year but, considering the re-circulation of credit availed in last two years, which comes to about a trillion rupees, the private sector does not seem to be facing any liquidity crunch. As a rule, this huge amount of credit, when retired, becomes available for fresh loaning to economic agents.
Credit to Public Sector Enterprises (PSEs) improved slightly from previous week's minus Rs 5.2 billion to minus Rs 5 billion during the week under report. The improvement came in the case of small PSEs as larger PSEs credit utilisation decelerated from Rs 2.1 billion on 7th October to Rs 1.9 billion on 14th. After accounting for changes in credit utilisation during the year so far by various economic agents (including government sector, private sector, PSEs and other heads), overall domestic credit expansion rose to Rs 115.7 billion on 14th October compared with Rs 106 billion on 7th.
In the foreign sector, net foreign assets (NFA) of the banking system deteriorated further showing loss of foreign exchange worth Rs 44.5 billion on 14th October compared with a loss of Rs 43.3 billion on 7th presumably on account of worsening trade balance. Liquid foreign exchange reserves, which were $12,561.5 million on 7th October accordingly declined to $12,504.2 million on 14th. The decline occurred mainly in the reserves held by the State Bank. The reserves having improved to $12,544.5 million on 21st deteriorated again to $412,503.6 million on 28th indicating continuing drawdown of net foreign assets of the banking system, which may cushion the effect of rising private and government sector borrowing on money supply in coming weeks.
In the meanwhile, money supply, which stood at Rs 62.6 billion on Sep 30, and rose marginally to Rs 62.8 billion on October 7 surged to Rs 71.2 billion on October 14 compared with a contraction of money supply of some Rs 11.8 billion in the corresponding period last year in the wake of much larger drawdown of net foreign assets (NFA) of the banking system facing relatively lower domestic credit expansion. (For comments and suggestions [email protected])
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