MoF's response to editorial

This is with reference to an editorial carried by Business Recorder on 11th January 2016. The editorial focused on the auction calendar for the third quarter, 2016 but confused the old maturing amount to be refinanced with fresh/ incremental borrowing requirement. Although, the numbers quoted are in line with Government's announced targets for the third quarter, yet the editorial is inconsistent in comparing them with the fresh banking deposits. In order to put all this in proper context, there are certain facts to be kept in view.
Despite Pakistan's continuing efforts towards fiscal consolidation the country still runs budget deficits, which is pre-approved from the parliament through the budget process every year. The borrowing requirements for the year are stated in the budget statements outlining the incremental borrowing needs.
The sources of finance available to the government are banking sector, non-bank and external sectors among others. The borrowing plan is prepared keeping in mind the absorption capacity of all these segments so it is unlikely that the incremental borrowing from banks would choke private sector credit, which is already showing encouraging signs.
It is not meaningful to compare the total borrowing requirement with the fresh deposit growth of the banking system. The total borrowing requirement includes maturing amount as well as additional requirement. The maturing amounts were originally financed through previous period deposits and would essentially be re-financed or rolled over while only the additional borrowing requirement would be met from the fresh deposit growth. Hence, in this scenario, even if all of additional borrowings are financed through banking source, the additional borrowing requirement for the third quarter is only Rs 107 billion. Moreover, our banking deposits have grown around 13-14 percent during the last five years, which suggest ample absorption capacity in the banking system for incremental borrowing without having an adverse impact on any indicators.