The government's borrowing for budgetary support from the banking system is declining as it stood at Rs 55.02 billion till April 15, 2006 against the target of Rs 98 billion for the FY 2005-06.
It is worth mentioning that it stood at Rs 155.59 billion during July 1 and March 4, 2006, which was 58.76 percent higher than FY 2006 limit. The State Bank of Pakistan's (SBP) second quarterly report released few weeks back also says that the larger borrowing was due to increased expenses on account of earthquake relief activities and the shift in composition of budgetary finance.
It says that specifically, 54.2 percent of the full FY05 estimates of external finance were realised during the first half of FY05 as the disbursements of loans from ADB and IDB and the receipts against the issuance of sukuk were realised during the period. This allowed the government to retire banking sector borrowings. In contrast, during first half of FY06 external finance receipts have been quite low, with 32.7 percent of the full year estimates being realised. As a result, the government borrowings from the banking sector have increased sharply, breaching the full year target by end-February 2006.
The latest data issued by the SBP reveal that the government's net borrowing for budgetary support from banks (scheduled and central) during July 1 and March 4, 2006 stands at 55.02 billion.
According to the break-up of the data, the central government's net borrowing rose to Rs 44.59 billion between July 1, 2005 and April 15, 2006, from Rs 13.35 billion, which it borrowed from SBP and commercial banks in corresponding period last year.
The provincial governments borrowing stood at Rs 10.43 billion. However, during the corresponding period they retired Rs 4.37 billion. Thus on balance, the overall government borrowing for budgetary support stood at Rs 55.02 billion.
During the period under review, the central government borrowed Rs 29.40 billion from SBP as against Rs 146.378 billion last year. From scheduled banks it borrowed Rs 15.19 billion.
The Bank further says that the Provincial governments during the period borrowed Rs 4.74 billion from the scheduled banks. During the same period last year they retired Rs 4.99 billion of scheduled banks. From the central bank they borrowed Rs 5.69 billion during the period under review against Rs 631 million they borrowed from SBP during the same period last fiscal.