Total borrowing of Punjab government from the State Bank of Pakistan stood at Rs 23.409 billion up to June 11, 2011, in addition to Rs 28.6 billion loan, it is learnt. Sources said that Rs 50.9 billion borrowing of the provincial government from the State Bank of Pakistan was converted into loan in September 2009 and the provincial government has so far repaid Rs 22.3 billion, and Rs 28.6 billion is outstanding to the SBP.
In the year 2009, the State Bank and the Punjab government reached an agreement to convert Punjab`s outstanding overdraft of Rs 50.9 billion into a four-year loan with interest equal to the six-month T-bill rate. During the fiscal year 2009-10, the government of Punjab was facing a net loss worth Rs 30 billion, which also delayed the salaries of government employees of the province. The situation further worsened when in a letter dated May 14, 2009, the State Bank asked the Punjab government to take "remedial measures" on urgent basis while the provincial government was warned by SBP in the letter saying that the SBP would be forced to exercise its statutory powers by dishonouring Punjab government's cheques if the situation persisted.
"The amount of loan is to be paid in 48 installments and the government of Punjab is paying Rs 1.06 billion per month while on the other hand, the government of Punjab has borrowed Rs 23.409 billion from the State Bank against its Rs 37.2 billion overdraft limit", sources added.
In September 2010, the Federal government, on the request of provinces, granted approval to the State Bank for the enhancement of the overdraft (OD) limits of the provinces to meet their current expenditures, in case of non-availability of funds. OD has a limit up to which an account holder can borrow from a bank if there are no funds in its account. Due to the 50 percent increase in salaries of the government employees announced in the FY10-11 budget, the provinces were entitled to this facility provided by the State Bank. The provinces--Punjab, Sindh, KP and Balochistan--were asked to increase their present OD limits from Rs 26.9 billion, Rs 9.9 billion, Rs 5.5 billion and Rs 4.5 billion to Rs 37.2 billion, Rs 15.00 billion, Rs 10.1 billion and Rs 7.1 billion respectively.
Sources said, "The Punjab province seems to be in fiscal discipline as it is repaying regularly to the State Bank". The Punjab government has termed its budget for the next fiscal year as a 'pro-poor and relief-oriented' one. In contrast to the tall claims of the Punjab government about the refusal to accept any sort of foreign assistance, the provincial revenue collection target inclusive of provincial sales tax on services is estimated at Rs 88.5 billion during 2011-12, down from the current year's original target of Rs 91.58 billion.
Sources said, "According to the constitution of Pakistan after the 18th amendment a province may raise domestic or international loan, or give guarantees on the security of the Provincial Consolidated Fund within such limits and subject to such conditions as may be specified by the National Economic Council".
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