KARACHI – The year 2010 will be remembered as the year of massive borrowings by the federal government for budgetary support. In a period of less than six months, (July to Dec ember 18, 2010) the budgetary borrowings of the government surpassed the quantum of total annual borrowings in FY10.
In 2009-10, the federal government borrowed Rs 330 billion, while from July-Dec 18, 2010, the budgetary borrowings went up to Rs 400 billion, Rs 70 billion higher than 2009-10. During the fiscal year 2009-10, the budgetary borrowings stood at only Rs 272 billion during July-December 19, 2009. The government borrowed Rs 304 billion from the State Bank of Pakistan (SBP) to meet its budgetary requirements, as compared to Rs 73 billion in the same period last year.
Surprising to note is the fact that during the last two-and-a-half financial years (FY09, FY10 and July-Dec 18, 2010), the federal government has borrowed a record Rs 1.046 trillion just for budgetary support. The government borrowed Rs 316 billion in FY09 and Rs 330 billion in the previous fiscal year.
“Poor revenue collection, massive expenditures of the cabinet and recent floods have left the government with no other choice but to borrow more and more money from the State Bank of Pakistan,” Ahmed Nabil, chief investment adviser of Pak-Oman AMC told Pakistan Today on Tuesday. The government had reduced the tax revenue collection target because of industrial and manufacturing slowdown and devastation caused by the floods this year, he added.
The non-performing loans of the banks have also mounted to Rs 494 billion in the first quarter of this fiscal, mainly due to floods, high cost of borrowings and slump in the industrial and manufacturing sector, he said. At present, only remittances showed impressive increase, otherwise, all other key economic indicators were depicting a critical condition of the economy, Nabil said.
He said political appointments in government departments and expansion of the cabinet also played an important role in enhancing the budgetary borrowings of the government, adding that the government should explore avenues to augment industrial and economic growth, reduce unnecessary expenditures, increase tax collection and minimise reliance on borrowings.
