The devolution of certain federal ministries to provincial governments after certain constitutional amendments is burdening the latter with additional administrative expenditures. This has changed the dynamics of bank’s lending to public and private sector to a great extent.
The figures released by the State Bank of Pakistan (SBP) for the first nine days of the fiscal year 2011-2012 show that the provincial governments are borrowing more than the federal government.
The central bank’s data reveals that from July 1 to July 9 the federal government’s budgetary borrowings from the banking system have significantly declined against that of the provincial governments.
The said period saw the federal government having deposited over Rs7.63 billion in its credit balance whereas last fiscal year it had borrowed Rs66.848 billion from the banks in the same period.
This time, the federal government maintains deposits of Rs66.086 billion against Rs21.822 billion of the corresponding period last year.
On the other hand, the provincial governments, including Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan, borrowed Rs38.273 billion more from the SBP compared to their last year’s borrowings of Rs21.822 billion. During these nine days, the Government of Punjab borrowed Rs22.668 billion, Government of Sindh borrowed Rs8.242 billion, Government of Khyber Pakhtunkhwa borrowed Rs8.855 billion and the Government of Balochistan borrowed Rs7.865 billion from the central bank. While the governments of Punjab, Sindh and Balochistan had taken only Rs10.258 billion, Rs3.728 billion and Rs4.420 billion, respectively, during the same period in FY10. Furthermore, the same period has seen the provincial government in Khyber Pakhtunkhwa maintaining deposits of Rs9.049 billion in its credit balance with the central bank. The scheduled banks hold Rs26.607 billion compared to Rs13.119 billion in FY10 in deposits from federal government. The SBP data show their deposits for the provincial government at zero.
The banks’ credit to the non-government sector also reduced with the latter’s deposits accumulating to Rs44.626 billion against Rs54.600 billion of FY10. The banks currently posses Rs46.964 billion deposits against last year’s Rs50.560 billion in their credit balance for the private sector. The government also failed to maintain its lat year’s deposits of Rs4.089 billion with the banks and had to borrow Rs2.290 billion. Overall, the government’s net budgetary borrowings from the banks, during the period under review, contracted to Rs12.269 billion from Rs56.109 billion in FY10.