KARACHI: The government borrowing for budgetary support posted an increase of 103 percent, rising to nearly Rs 1.2 trillion by the end of fiscal year 2011-2012 (FY12) mainly because of a shortfall in revenue. "Slow foreign inflows, rising current expenditures and less than target revenue collection are responsible for substantial budgetary borrowing during the last fiscal year," some economists said.
The PPP-led coalition government failed to develop fiscal discipline and generate new revenue resources to curtail the rising fiscal deficit, which resulted in high borrowing from the domestic banking system, they added. They said the Federal Board of Revenue had already missed Rs 1,952 billion revenue collection target set by the government for FY12, adding that an increase was also witnessed in government expenditure, including security and subsidies.
SBP repeatedly criticised this trend and expressed its concern over the rising government borrowing and moved to restrict the federal government through amendments in rules. However, it seemed that the government was not properly implementing the laws, they mentioned.
According to State Bank of Pakistan (Amendment) Act (2012), the government borrowing from the SBP was required to be repaid at the end of each quarter and the existing stock was to be retired within eight years, they said, adding that due to financial problems, it seemed difficult for the government to retire borrowing at end of every quarter.
The SBP data on Friday showed that borrowing for budgetary support by the federal and provincial governments stood at Rs 1.198 trillion during FY12 against borrowing of Rs 590 billion in FY11, depicting a healthy increase of Rs 608 billion.
Of the total borrowing for budgetary support, Rs 1.17 trillion was borrowed by the federal government. The federal government borrowing from SBP surged by 374 percent or from Rs 366 billion to Rs 464.481 billion in FY12 as against Rs 98 billion in FY11. Moreover, borrowing from scheduled banks also showed an increase of 13 percent during the same period. The federal government borrowing from scheduled banks surged to Rs 696.524 billion from Rs 617 billion.
"Although, some steps are being taken to prevent the rising government budgetary borrowing, however so far borrowing is on upward side from the central bank as well as from other banking system," economists added. They said that rising fiscal deficit had forced the government to borrow from the domestic banking sector including State Bank and scheduled banks to fulfil its financial needs as the country fiscal deficit was over a trillion rupees during the last fiscal year.
In the current economic scenario, when major external funding including collation support fund has come to standstill, the domestic banking sources are the single way for the government to finance its fiscal deficit, they added. They said that rising budgetary borrowing may increase the inflationary pressure on the economy. The inflation already stood in double digits over the past few years.