Govt printed banknotes worth Rs966b in 3 years

The PPP government has set a record by printing Rs966 billion notes from the State Bank of Pakistan (SBP) during the last three years, resulting in stifling inflation.
Responding a question, the Finance Minister Abdul Hafeez Shiekh told the National Assembly in a written reply that the value of banknotes printed in last three financial years was Rs966 billion.
It is important to mention that the resorting to print notes increases inflation which has remained in double digits ever since PPP came into power. It decreases opportunities for investment in new sectors under the revenue net. The fiscal deficit under the PPP government has remained over 6 percent of GDP for the last three fiscal years.
HAFEEZ JUSTIFIES BORROWING
Responding to a question of PML-N’s MNA Nuzhat Sadiq, the Finance Minister told the National Assembly in a written reply that the value of banknotes printed was Rs439 billion in 2008-09, Rs154 billion in 2009-10 and Rs373 billion in 2010-11. He said the printing of currency notes did not directly impact inflation, however when issued resulted in increased currency in circulation. “The prime reason for the increase in currency in circulation is heavy government borrowings from SBP for budgetary support. The government is constantly striving to reduce reliance on the borrowing from SBP,” Sheikh further told the house.
He said government borrowing from SBP has shown some respite during the last few months. “The declining government reliance on SBP for financing of fiscal deficit since mid-December 2010 is likely to continue as an understanding has been reached with the government to restrict such borrowings at the end-of-September level of Rs1.29 trillion. This is expected to help in restraining the printing of new notes and slowing down growth in money supply,” he added.

FOREIGN LOANS AND REMITTANCES
The Finance Minister also informed the National Assembly that total amount of foreign loan borrowed (disbursed) by the government during the last three years amounted to $8.961 billion, comprising $4.113 billion during 2008-09, $3.019 billion during 2009-10 and $1.830 billion during 2010- 11. “Budget Estimates of disbursement of foreign loans are $ 3.059 billion during 2011-12. Debt Servicing (Principal repayment plus interest payment) of foreign loans is being made on due dates and appropriate budget provisions are made as per amortisation schedules. Repayment of foreign loans has to be made on due date and cannot be delayed even for a single day,” he further told the house in a written reply.
Responding to another question the Finance Minister told the House that out of total Rs464,851 million non-performing loans Rs354,185 million or 76 per cent was in loss category.
“However, it is important to note that these NPLs do not necessarily translate into banks’ losses, rather these are an indicator of the quality and performance of loans/advances. A substantial part of these NPLs is eventually repaid by the borrowers or realised by the banks through legal means,” he told the house in a written reply.
Hafeez further informed the National Assembly that the total amount of NPLs increased from Rs200, 272 as on December 31, 2006 to Rs464, 851 million on December 31, 2010. He said economic downturn, rising borrowing cost, falling repayment capacity of the borrower due to reduction in production because of shortage of electricity, gas and poor law and order situation, recent floods which added to the problem loans particularly in Agriculture and SME Segment and global economic recession and rise in international commodity and energy prices were the main reasons behind increase in NPLs.

FDI declines to $1.9b
The National Assembly was also informed that the foreign direct investment (FDI) declined from $5.4 billion in 2007-08 to $1.9 billion in 20010-11. A parallel decline in the repatriation of the profits by foreign investors also occurred as remittances from Pakistan amounted to $9.5 billion in 2007-08 while they declined to $2.1 billion in 2010-11.
Hafeez further informed the house that an amount of Rs229.3 billion had been raised by Central Directorate of National Savings through various National Saving Schemes during the year 2010-2011. “These receipts are utilized for budgetary support by the Government,” he told the House.
The Finance Minister told the National Assembly that FBR had collected Rs628.2 billion net (provisional) under the sales tax head during financial year 2010-11. He said the government had taken number of steps in the sales tax structure to broaden the tax base during last year such as:— A) Withdrawal of exemptions from fertilizers, pesticides, tractors and sugar. B) Zero- rated facilities has been withdrawn from plant, machinery and equipments. C) Zero- rating facilities has been restricted to registered persons for export (textiles, leathers, carpets, sports goods and surgical equipments). “These measures have improved the revenue collection from sales tax by 21.7 per cent during 2010- 11. Revenue collection increased to Rs628.2 billion during 2010-11 from Rs516.3 billion during 2009-10,” he added.