Borrowing for budgetary support from banking system posted increase of 38 percent, amounting to Rs 129 billion, during first seven weeks of current fiscal year, mainly due to rising expenditure, shortfall in revenue and foreign inflows. Bankers said the decline in the revenue receipts, despite increase in current expenditures, compelled the federal and provincial governments to borrow from the central bank as well as other from banks to meet their financial requirements.
As per commitment, the federal government borrowing for budgetary support from the State bank remained on the lower side for last few weeks. However, at this time borrowing from scheduled banks presented a substantial increase, they added. "The high borrowing from the banking system reflects that the federal and provincial governments are still facing financial difficulties, which force them to rely on the banking system and borrow for budgetary support due to below the target revenue collection, rising current expenditures and high subsidies, besides slow privatisation process," bankers said.
The central bank said the combined borrowing of federal and provincial governments for budgetary support from banking sector (SBP and scheduled banks) surged by 38 percent, or Rs 35.43 billion, during the first seven weeks of current fiscal year. The overall borrowing for budgetary support from banking system stood at Rs 129 billion during the period from July 1, 2011 to August 20, 2011 (seven weeks compared with Rs 93.74 billion of the corresponding period of last fiscal year.
With the current upsurge, overall stocks of budgetary borrowing mounted to Rs 2.73 trillion, as on August 20, 2011, from Rs 2.601 trillion in June 2011, depicting an increase of 5 percent in first seven weeks of current fiscal year. During the period under review, the federal government has retired Rs 21.446 billion to the SBP as against borrowing of Rs 155 billion in same period of last fiscal year.
However, the federal government borrowing from scheduled banks posted a massive increase of and surged to Rs 110.16 billion during July 1, 2011 to August 20, 2011 of current fiscal year compared with a retirement of Rs 44.77 billion in corresponding period of last fiscal year.
Overall stocks of government borrowing for budgetary support from scheduled banks mounted to Rs 1.773 trillion as on August 20, 2011 previously was stood at Rs 1.663 trillion in June 2011, depicting an increase of 7 percent in first seven weeks of FY12. In addition, the governments borrowed Rs 24.4 billion from SBP and Rs 15.87 billion from scheduled banks to meet their financial requirements.
Khyber Pakhtunkhwa government borrowed Rs 11.11 billion, Punjab Rs 19.781 billion and Sindh government Rs 2 billion. However, Balochistan government retired Rs 8.5 billion during the period, which reflects strengthened financial position of Balochistan.
"Continuous revenue shortfalls amid slow economic activities are responsible for high budgetary support from the banking system," economists said. They said high borrowing from scheduled banks as compared to the central bank borrowing depicts that the central bank is shifting the borrowing to the scheduled banks by selling more treasury bills. In addition, it also replicates that federal government is still fulfilling its commitment of no more borrowing from the central bank to curb the inflationary pressure.
With decline in government borrowing from SBP, positive current account balance and rising foreign reserves, the State Bank in its last monetary policy cut the key policy rate by 50 basis points to support the private sector growth. Similarly, as per latest statistics, Broad Money (M2) registered a negative growth of 1.45 percent during July 1, 2011 to August 20, 2011 as compared to a negative growth of 2.04 percent in the corresponding period of last fiscal year.
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