The resource-constrained government has declared to rely more on domestic sources, primarily banks, for its rampant non-development budgetary expenditures during fiscal year 2012. The government borrowed 87 per cent or Rs323.034 billion more from the banking system during July-June 18 of FY11.
According to figures released by the State Bank on Monday, during the period under review the government borrowed Rs693.504 billion from the central and commercial banks compared to Rs370.470 billion of corresponding period last year.
The heavy borrowing, according to the central bank data, made broad money expand to 13.99 per cent or Rs808.287 billion during the said period. The same period in FY10 had seen M2 to grow to 9.51 per cent or Rs488.638 billion in monetary terms.
The SBP said that money circulation in the country is Rs268.722 billion, 43 per cent or Rs81 billion more than Rs197.381 billion of the corresponding period last fiscal year.
The other deposits with SBP aggregated at Rs3.593 billion compared to Rs1.323 billion of corresponding period last year. The total Demand and Time Deposits, including the Residents Foreign Currency Deposits, increased to Rs535.971 billion, exhibiting an increase of Rs236.287 billion when compared with Rs299.6 billion of FY10.
The central bank said during July 2010-June 18, 2011 the government borrowed over Rs148.079 billion from the State Bank against last year’s Rs 130.339 billion. The cash-strapped government, however, focused more on the scheduled banks, borrowing Rs545.425 billion from them. This registered an upsurge of 127 per cent or Rs305.502 billion compared to Rs240.131 billion of the same period in FY10.
The banks credit to the non-government sector is, however, constantly falling, having contracted to Rs120.301 billion from Rs174.086 billion of last year.
There is, however, some upward mobility in the banks’ lending to the private sector that during the said period stood at Rs103.633 billion against Rs85.301 billion of last year. With their non-Nato strategic allies in Washington refusing to provide more financing under the Coalition Support Fund and the IMF still reluctant to release the pending two tranches, the economic managers tend to depend more on domestic sources, which the analysts believe, are none other than the banks.
Government borrowings from the central and scheduled banks have increased inflationary pressures while also crowding-out the private sector. Federal Finance Minister Abdul Hafeez Sheikh has been forced to focus more on self-sufficiency after US Secretary of State Hillary Clinton’s recent statement before the Congress that her government would give no more financial support to Pakistan. It is yet to be seen whether the government will indulge in more bank borrowing. The sociao-economic repercussions of such rigorous borrowings are already being seen and will become even more apparent during FY12.
