KARACHI – Federal government borrowed the enormous sum of Rs 393 billion for its budgetary support from July 2010 to March 2, 2011. In comparison to the corresponding period of last financial year, budgetary borrowings of the government reflected an increase of Rs 93 billion, or 31 percent in this fiscal. In the previous fiscal year, budgetary borrowings amounted to Rs 300 billion. The government has borrowed Rs 144 billion from the State Bank of Pakistan while Rs 265 billion has been borrowed from the scheduled banks from July-March 5, period of FY2011.
By March 5, 2011, the total stock of the budgetary borrowings has risen to Rs2.404 trillion. According to the Broad Money M-2 report of the SBP, budgetary borrowing undertaken by the provincial governments is negative by Rs 57.66 billion against borrowings of Rs 14.56 billion in the previous financial year. Borrowing from the scheduled banks is mainly done through the fortnightly auctioning of Market Treasury Bills of different maturity periods of three, six and twelve months. The government also borrows in the long term by quarterly auctioning of Pakistan Investment Bonds with a maturity of three to 30 years. Sources indicate that the growing fiscal deficit is ballooning the government’s borrowing.
They point out that the low tax-to-GDP ratio and less than forecast disbursement of loans on the part of the donors have also forced the government to borrow more and more money from the State Bank of Pakistan and domestic commercial banks. In the current financial year, credit supply to the non-government sectors showed a slight increase and amounted to Rs 239 billion from July 2010 to March 5, 2011, compared to Rs 223 billion in the same period in the previous year.
The private sector has borrowed Rs 212 billion in this fiscal period against Rs 147 billion borrowed in the last fiscal period. Credit supply to the public sector enterprises (PSE) remained low, at Rs 26 billion in the current fiscal in contrast to Rs 77 billion borrowed in the corresponding period last year. Sources indicate that the government should minimise its dependence on borrowing, since the payment of mark-up on borrowing would take away a big chunk of the budget, creating an extra burden in the form of additional expenditure.
They also stressed upon the need for the government to make concerted effort to obtain credit from donor countries, agencies and also absorb money from the international markets by selling global depository receipts (GDR) of large public sector entities that would further improve the situation in terms of foreign exchange reserves and restrict debt.
