Budgetary support: Borrowing stock exceeds Rs14trn

KARACHI: The overall stock of the borrowing for budgetary support crossed Rs 14 trillion in January 2021.

According to the State Bank of Pakistan (SBP), the borrowing for budgetary support from the domestic banking system increased by Rs 291 billion during July 1, 2020 to Jan 15, 2021 compared to retirement of Rs 11.66 billion in the same period of last fiscal year (FY20).

With current surge, the overall stocks of borrowing for budgetary support reached Rs 14.039 trillion mark as on January 15, 2021 up from Rs 13.748 trillion in June 2020.

During the period under review, the federal government retired significant amount to the SBP, while the borrowing was made from the banks to finance the fiscal deficit.

According to SBP, the federal government's borrowing for budgetary support from the SBP was remained negative. The federal government retired some Rs 324.261 billion to the SBP during July1, 2020 to Jan 15, 2021 against a retirement of Rs 478.457 billion in the same period of last fiscal year.

The government’s borrowing from banks declined slightly. The federal government raised some Rs 837.674 billion from the domestic banks during July 2020 to mid of Jan 2021 as compared Rs 842.296 billion in corresponding period of last fiscal year, depicting a decline of Rs 4.622 billion.

On the other hand, provinces' financial health is much better than federal government as all four provinces make repayments instead of borrowing during the period under review.

All four provinces cumulatively retired some Rs 190 billion to the State Bank. Government of Balochistan retired Rs 35 billion, Khyber Pakhtunkhwa some Rs 15.3 billion, Punjab government Rs 124.6 billion and government of Sindh has repaid some Rs 14 billion to SBP during July 1, 2020 to Jan 15, 2021.

As per agreement with the international financial institutions, the federal government is required to gradually eliminate the borrowing from the SBP, therefore the government is borrowing funds from banks to meet its financial needs.

Copyright Business Recorder, 2021