Deficit financing for 1QFY13: government''''s bank borrowings surpass budget estimates

The government borrowing from commercial banks surpassed budgetary projections for deficit financing for the entire fiscal year during the first quarter, an official said on Wednesday. Sources said that the government borrowed Rs 546 billion during July-September this year, up by 16 percent against the budgetary projection of Rs 484 billion borrowing from scheduled banks for financing fiscal deficit in 2012-13.
The government''''s total borrowing from scheduled banks in July-September 2011 was Rs 223 billion which surged to Rs 564 billion for the same period of the current fiscal year, reflecting an increase of 152 percent. An official said that the government''''s heavy reliance on borrowing from banking system would negatively impact the growth by crowding out the private sector.
The interest payment on domestic and foreign debt has been on the rise during the current fiscal year because of the government''''s heavy reliance on bank borrowing. The interest payment on domestic and foreign debt stood at Rs 313 billion during July-September 2012 which is 72 percent higher than Rs 181 billion for the same period last year.
Interest payments on domestic loans rose to Rs 299 billion in the first quarter of the current fiscal year against Rs 169 billion for the same period last year, data showed. Sources said that according to fiscal operation statistics for the first quarter which are yet to be released, the fiscal deficit was going to be around 1.2 percent of GDP or Rs 282 billion.
The federal government has transferred Rs 278 billion to the provinces from total collection of Rs 428 billion of the Federal Board of Revenue (FBR). The non-tax revenue stood at Rs 216 billion in the first quarter of the current fiscal year largely because of $1.18 billion reimbursement by the US for Coalition Support Fund (CSF). The reimbursement of CSF has enabled the government to limit the fiscal deficit to around 1.2 percent of the GDP. A senior official said that the fiscal deficit during the first quarter of the current fiscal year would have been considerably high if CSF amount had not been received.
The total federal government expenditure had reportedly increased to Rs 735 billion in July-September 2012 against Rs 554 billion for the same period last year because of the considerable increase in the interest and other expenditure. An official said on condition of anonymity that the government borrowing was expected to go up considerably from budgetary allocation in the current fiscal year because of higher than expected fiscal deficit.