'Provincial governments not borrowing from SBP'

The provincial governments are not borrowing funds from State Bank of Pakistan to finance its expenditures. According to Punjab Finance Department's spokesperson, here on Friday, provinces are only allowed an overdraft facility in accordance with State Bank Act 1956. The facility has been provided to enable provincial governments control temporary mismatch between their receipts and expenditures.
He stated that a news item that provinces are borrowing heavily from SBP is totally incorrect, baseless and contrary to the facts. While clarifying the actual facts, he said the provincial governments do not borrow funds from SBP to finance their expenditures. He further said it is a well-known fact that over 80 percent of the resources of the provincial governments come from the federal transfers.
"These transfers are received at the end of every month whereas bulk of the expenditures of the provincial governments (eg salary payments and debt servicing) is front loaded. To enable provinces to manage their payments, the SBP has allowed overdraft limits to all provinces. The limit for each province has been fixed equivalent to its pay and pension cost for a period of six months. The amount of overdraft is retired as soon as funds are received," he added.
According to the spokesperson, the cash balance position of Punjab is positive at the beginning of the financial year 2010-11 and also on the first day of the month of November 2011. The balance would further strengthen on receipt of arrears of divisible pool transfers pertaining to first four months of the ongoing financial year, which are likely to be received at the end of the month of November.