The budget deficit would be critical to arrest the inflationary pressure and to achieve 8 percent inflation target for the current fiscal year if the government fails in ensuring regular price monitoring. Finance Minister Ishaq Dar said on Wednesday that reduction in deficit would have salutary effect on inflation and the government would ensure regular price monitoring with a view to ensure adequate supplies of all commodities and extensive networks of Juma and Itwar bazaars.
He said that wherever required imported goods would be used to ward off domestic shortages. According to the minister other measures aimed at arresting inflationary pressure are using public savings and cheap foreign borrowings to finance deficit and reduce the burden of debt servicing. The new domestic saving schemes would be introduced for enhancing public access to government securities which are presently heavily concentrated amongst banks and given their high spreads much of the benefits of government borrowings are flowing to banks than to general depositors.
Dar said the government would induct professional managers in debt management and taking advantage of numerous opportunities to diversify debts both domestic and international. Elimination of borrowings from State Bank will be pursued vigorously, he said. The minister lamented that SBP Act, 1956, which was amended by this parliament in 2012 imposing two important constraints on the government borrowings from the State Bank, which is basically printing of money, has been consistently violated by the previous government. According to the first condition, he stated, the government could borrow from SBP only for a maximum period of three months, and at the end of each quarter those borrowings will have to be retired. The second condition was that, existing stock of debt from the State Bank of Rs 1,400 billion was to be retired in a period of 8 years.
He said the PPP government instead of retiring it, increased the stock of debt to Rs 2,300 billion. He said the government is now faced with this onerous responsibility to retire this debt in 6 years at the rate of nearly Rs 400 billion annually.