All sectors contributed to a record high monetary expansion of Rs 549 billion (or over 16.1 percent) recorded during FY07 to June 9 compared with Rs 460 million (or 14.5 percent), and Rs 383 billion (or 13 percent) being, respectively, the Credit Plan provision and expansion in the comparable period of last year.
Government sector contributed Rs 165 billion, entirely on account of budgetary borrowing from scheduled banks (up Rs 196 billion), as borrowing from SBP denoted a decline of Rs 23 billion and commodity operations a decline of Rs 8 billion compared with their June 30 2006 levels. During the current week alone both Federal and provincial governments borrowed some Rs 25 billion from the banking system.
Another Rs 292 billion were contributed by credit utilisation by private sector (up Rs 279 billion) and PSEs (up Rs 13 billion) although during the current week private sector and PSEs retired some Rs 8 billion and Rs 2 billion respectively. At these levels, although private sector is still lagging behind the whole year Credit Plan provision of Rs 390 billion by a wide margin, credit availed by PSEs violated the CP target by about Rs 8 billion.
Monetary expansion, originating from foreign sector, amounted to Rs 159 billion during the year to June 9. Although authors of Credit Plan had visualised only an expansion Rs 10 billion on account of this sector, whereas actual expansion in the comparable period of FY06 had amounted to Rs 21 billion. The CP provision was so low that it just equalled the expansion figure recorded during the latest one week.
It is strange that the fiscal managers did not bother to take the central bank into confidence on this point at the beginning of the year, although the SBP Act implicitly provides for such information-sharing through the Monetary and Fiscal Policies Coordination Board. The result is that SBP is unable to sterilise the monetary impact of foreign sector at the fag end of the year.
(For more details see 'Money week' appearing Monday next)
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