The federal government borrowing for budgetary support has crossed the level of Rs 1 trillion because of higher fiscal deficit and less than expectation revenue collection. "Phenomenal increase in current expenditure, rising subsidy on commodities, Public Sector Enterprises' losses and less than target revenue collection are responsible for substantial budgetary borrowing by the federal government during the current fiscal year," economists said.
Followed by shortfall in revenue, it was already being expected that the government borrowing will cross Rs 1 trillion mark during this fiscal year, they added. In the current economic scenario, when the country's revenue is less than expenditures and foreign inflows are on slow track, the borrowing from domestic sources is only way for the federal government to meet its financial requirements, they added. The higher budgetary borrowings will be a major challenge for the upcoming government and the new setup will be required to introduce tax reforms to enhance revenue collection, economists said. As per State Bank of Pakistan (Amendment) Act (2012), government borrowing from the SBP is required to be repaid at the end of each quarter and the existing stock is to be retired by April 2019, they added.
The State Bank of Pakistan on Tuesday revealed that alone the federal government has borrowed Rs 1.086 trillion during July 1, 2012, to May 10, 2013 for budgetary support from banking system (including SBP and scheduled banks) compared with borrowing of Rs 1.049 trillion in corresponding period of last fiscal year (FY12), depicting an increase of 4 percent or Rs 37 billion. During current fiscal year, the federal government's borrowing for budgetary support included Rs 454.863 billion from the State Bank and some Rs 631.524 billion from scheduled banks.
The federal government borrowing for budgetary support from SBP has surged by 7 percent or Rs 30 billion to Rs 454.863 billion as on May 10, 2013, compared with Rs 424.869 billion in corresponding period of last fiscal year, ie, 2011-12. In addition, borrowing from scheduled banks witnessed a slight increase of one percent to Rs 631.524 billion during the period under review. As against the high borrowing from State Bank, provinces have retired heavy amount during the period under review. The retirement of financing by all provinces reflects strengthened financial health. During the period under review provinces have retired total Rs 32.467 billion to the central bank and some Rs 6.25 billion to scheduled banks.
Government of Balochistan has retired Rs 17.453 billion, Khyber-Pakhtunkhawa some Rs 14.197 billion and Sindh government Rs 3.94 billion as on May 10, 2013. However, Punjab is the only province, which has borrowed Rs 3.132 billion from SBP during the period. Cumulatively, federal and provincial governments borrowing for budgetary support stood at Rs 1.042 trillion during July 1, 2012 to May 10, 2013 as compared to Rs 1.076 trillion in the corresponding period of FY12. Similarly, as per latest statistics, Broad Money (M2) registered a growth of 9.86 percent during the period.