The federal government's borrowing for budgetary support posted a notable increase of 398 percent reaching Rs 1.4 trillion in the first half of this fiscal year (FY19), mainly due to shortfall in revenue and slow foreign inflows.
Economist said that higher fiscal deficit followed by less than expectations revenue collection and a surge in current expenditures are responsible for the substantial budgetary borrowing. As per provisional data, the Federal Board of Revenue (FBR) is facing a revenue shortfall of some Rs 170 billion and has provisionally collected net revenue over Rs 1.779 trillion in first half of this fiscal year.
Samiullah Tariq, Director Research, Arif Habib Limited said that the continued and massive borrowing from the banking system particularly from the SBP is clearly reflecting that the government is facing financial difficulties due to shortfall in revenue and slow foreign inflows. "The revenue collection has declined due to abolition of tax on telecom sector on the directives of the Supreme Court and some reduction on petroleum products by the government to facilitate masses," he added.
He said that the recent borrowing trend also reflects that the federal government has shifted its borrowing from scheduled banks to SBP due to maturity of a number of Pakistan Investment Bonds (PIBs), which fresh auctions were not successful due to unattractive rates.
The State Bank of Pakistan on Friday revealed that federal government's borrowing for budgetary support surged to Rs 1.436 trillion during July1, 2018 to December 28, 2018 as compared to a borrowing of Rs 288 billion in corresponding period of last fiscal year, depicting a notable increase of 398 percent or Rs 1.148 trillion.
With current borrowing in the first half of this fiscal year, the overall stocks of federal government's borrowing from SBP reached Rs 5.1 trillion mark.
During the period under review, federal government's borrowing for budgetary support from scheduled banks witnessed massive declined and stood negative. The federal government has retired some Rs 536 billion to scheduled banks in first half of this fiscal year against Rs 356 billion borrowing in same period of last fiscal year.
On the other side, provinces during the period has presented strengthen financial health as all four provinces make payments instead of borrowing.
During the period under review all four provinces retired some Rs 160 billion to the State Bank. Government of Balochistan retired Rs 26.58 billion, Khyber Pakhtunkhwa some Rs 23.684 billion, Punjab government Rs 79.27 billion and government of Sindh has repaid Rs some Rs 30.66 billion to SBP during July to December 2018.
Similarly, as per latest statistics, Broad Money (M2) has registered a growth of 3.40 percent during the first half of fiscal year 2019 as compared to 2.6 percent in the corresponding period of last fiscal year 2018.
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