The increasing government reliance on banks to finance its budget is a serious cause of concern for particularly private business who are crowded out because of two very well known reasons. The real challenge lies in reviving private investment in the economy. Inflationary pressures have not subsided either despite sluggish GDP growth. At the same time, the scheduled banks continue to avoid extending credit to private businesses, which are already suffering from energy shortages.
It is a serious matter of concern that borrowing from the banking system has risen substantially during this fiscal year, Rs 1098 billion (Rs 707 billion excluding the Rs 391 billion related to the partial settlement of circular debt), from 1st July to 25th May, FY12 with borrowing from SBP (on cash basis) expanding by Rs 414 billion during the same period.
In fact, the latter has accelerated during 1st April to 4th June, 2012, increasing by Rs 310 billion, pushing the outstanding stock to Rs 1660 billion (on cash basis). Doesn't government know that its behaviour contravenes the SBP (Amendment) Act 2012, which requires not only zero quarterly borrowings but also envisages their retirement in the next seven years?