The government exceeded by Rs 60 billion the target of borrowing from the banking system during the first quarter of the current fiscal year, said Sartaj Azizz, a former finance minister. Talking to 'Paisa Bolta Hai', the Senior Vice President of PML-N said that the government borrowed Rs 270 billion against the target of Rs 210 billion for July-September 2011-12, thereby exceeding the target by Rs 60 billion.
He said that borrowing by the government could have gone to Rs 330 billion had it not saved Rs 60 billion during the first quarter. Sartaj said that maximum borrowing was from the commercial banks, and not from the State Bank of Pakistan, which would have increased the cost of borrowing of the government despite recent discount in interest rate by the regulator.
The SBP has been facilitating commercial banks in terms of liquidity by regularly injecting money. The PML-N leader said that saving of Rs 60 billion would not be sustainable due to the difficulty to pass on the average cost increase in the price of electricity. He said that increase in international oil prices would be a negative factor that would escalate average electricity cost.
Sartaj considered fiscal deficit as a serious problem with the gap between expenditure and revenue growing, and said that managing a budget deficit to 5.5 percent for the current fiscal year would be an achievement. However, he said, the government's borrowing could go up considerably from the budgetary estimate if foreign inflows projected in the budget did not materialise.
A top official of Finance Ministry recently said that the Rs 60 billion saved in the first quarter would help contain the fiscal deficit at 1.1 percent of the GDP. He claimed Rs 25 billion saving from Public Sector Development Programme (PSDP) as Rs 50 billion were released in the first quarter against target of Rs 75 billion and Rs 35 billion from current expenditure - Rs 16 billion from grants and subsidies, Rs 9 billion from interest payments as well as considerable saving from defence. As a result, budget deficit was contained at 1.1 percent of the Gross Domestic Product (GDP), or Rs 232 billion for the first quarter by limiting expenditures to Rs 514 billion, he added.