As expected, surge in government borrowing for commodity operations continued through the week ended on May 23, 2009. Borrowing for the purpose rose from Rs 152.5 billion at the end of previous week to Rs 178 billion at the end of current week, showing an increase of Rs 25.5 billion in the last seven days.
Needless to repeat, all of fresh borrowing should have gone to procuring wheat, especially in Punjab, and mainly through Punjab Food Department and Pakistan Agricultural Storage and Services Corporation (Passco).
Passco was reported to have procured 15,26,694 tons wheat from 15 April to 10 May, 2009 against its procurement target of 1.5 million tons, enhanced to 2 million tons by the Federal government on April 30, 2009. Out of the procured quantity, the bulk, ie, 14,68,315 tons was procured from Punjab.
In the meanwhile, the government of Punjab has constituted 'monitoring' and 'facilitating' teams at the district level to monitor wheat procurement campaign and ensure the implementation of the farmer-friendly policies of the government. The teams would also keep a watch on farmers that they do not sell their wheat in the open market below the rate of Rs 925 and, if they were forced to do so, the team would make arrangements to see that the wheat was taken to the procurement centres immediately and the farmers got the just price.
A recent survey, however, alleged that, of the farmers surveyed, only 9.3 percent told that they had sold their surplus produce directly to one of the two government departments, while a huge number, constituting 74.6 percent of them, disposed of their surplus wheat to the middlemen. The survey also alleged that the government departments were favourably poised to appease the big farmers, as 17.5 percent of the surveyed big farmers had sold their produce to the government while only 5 percent of the small farmers were able to secure a deal with government departments.
Among other developments, like commodity operations, government borrowing for budgetary support also increased by Rs 13 billion to an overall figure of Rs 345 billion during the week under report, while in the previous week borrowing for budgetary support had declined by Rs 8 billion to Rs332 billion. At its present level, government's recourse to central bank money for the purpose amounted to Rs 198.5 billion (which remained almost unchanged at its previous week's level), while the remaining Rs 147 billion was accounted for by the scheduled (mainly commercial) banks, lending representing an increase of about Rs 13 billion over the previous week.
As for the non-government corporate sector, including the PSEs, credit utilisation registered yet another decline over the week amounting to some Rs 4.5 billion. Both subsectors shared the decline, but bulk of it was due to private sector which retired well over Rs4 billion during the week to less than Rs 23 billion while, in the case of PSEs, credit utilisation only fell by Rs 0.3 billion to about Rs 146 billion.
Available data or the first nine months (up to end of March, 2009) of the year indicated that an unusually large part of the amount borrowed was accounted for by sundry PSEs (over Rs 116 billion) while the five major autonomous bodies resorted to only modest bank borrowing (about Rs 27 billion). OINs of the banking system showed a net build-up of other assets of about Rs 6.5 billion reflected in the lower net total of other liabilities which stood reduced to Rs 205.5 billion on May 23, compared Rs 212 billion on May 16,, 2009.
Adjusted for all the foregoing developments in the government sector, the corporate sector and OINs/NFA of the banking system, incremental money supply during FY09 to May 23 stood at Rs 256.2 billion, or 5.46 percent, showing a net increase of about Rs 40 billion during the week entirely accounted for by the domestic sector and, within it, by the government sector as foreign sector contributed to a net decline in money supply of about Rs 1 billion with NFA of the banking system deteriorating from minus Rs 227 billion last week to minus Rs 228 billion on May 23.
The entire increase in money supply during the week was represented by an addition in demand and time deposits as currency in circulation actually showed a reduction of about Rs 5 billion. (For comments and suggestions [email protected])
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