The floods across the country have created serious financial difficulties for the government and forced it to use the central bank's borrowing window for carrying out relief activities. The State Bank of Pakistan on Wednesday said that Rs 103 billion has been borrowed by the federal and provincial governments from it for budgetary support during first week of August 2010.
The federal and provincial governments' borrowing for budgetary support from the central bank had reached Rs 105.251 billion on August 6, 2010 from Rs 2.293 billion on July 30, 2010, depicting an increase of Rs 102.958 billion in a week. The federal government had borrowed Rs 78.721 billion during the week and its borrowing from the central bank mounted to Rs 114.273 billion on August 6, 2010 from Rs 34.552 billion on July 30, 2010.
During the period borrowing of three provinces--Balochistan, KP and Sindh--was in negative position, while Punjab borrowed Rs 13 billion from central bank in the first week of August. However, the net government sector budgetary borrowing from banking system (including State Bank and scheduled banks) during the first five weeks of the current fiscal year 2010-11 has registered decline and stood at Rs 83.846 billion on August 6, 2010 as compared to Rs 143.462 billion in same period of last fiscal year, depicting a decrease of Rs 60 billion.
Economists and analysts believe that massive borrowing by the governments has been made for fast relief activities against flood. Economists said that government is already facing financial difficulties due to the rising current expenditure and revenue shortfall, while recently relief activities in the flood effected areas has further enhance the government's borrowing. However, they believed that government budgetary borrowing would be in limitation by end of first quarter as foreign aid for flood victims is being announced and will soon deliver to Pakistan, which would help to retired government budgetary borrowing.