The PTI government made record Rs 3.3 trillion borrowing for budgetary support from State Bank of Pakistan (SBP) during the last fiscal year (FY19). The borrowed amount is almost equal to previous stocks of Rs 3.66 trillion as on June 30, 2018. Economist said that higher fiscal deficit followed by lower revenue collection and massive repayment of long term investment bonds are chief reasons behind substantial budgetary borrowing from the SBP.
The borrowing trend also reflects that the federal government has shifted its borrowing from scheduled banks to SBP due to maturity of a number of Pakistan Investment Bonds (PIBs), they said and added that fresh auctions for long-term investment bonds were not successful due to unattractive rates during the last fiscal year.
SBP statistics issued on Friday revealed that Pakistan Thereek-e-Insaf (PTI) government in its first year has borrowed massively from the State Bank for fiscal deficit.
The federal government borrowing for budgetary support from SBP has posted a notable increase of 138 percent in FY19. The government borrowed Rs 3.305 trillion from SBP for budgetary support from July 1, 2018 to June 28, 2019 as compared to Rs 1.404 trillion in the corresponding period of FY18, depicting a notable increase of Rs 1.901 trillion.
The massive borrowing of Rs 3.3 trillion by the PTI government is almost equal to previous stocks of budgetary borrowing from SBP, which stood at Rs 3.66 trillion end June 2018. In addition, the overall stocks of the federal government budgetary borrowing from SBP are likely to reach Rs 6.9 trillion mark end of June 2019.
Samiullah Tariq, Director Research Arif Habib Limited, said that the continued and massive borrowing from the SBP is clearly reflecting that the government is facing financial difficulties due to shortfall in revenue. "The federal government has financed all of deficit from domestic sources, besides massive retirement of PIBs during the last fiscal year and the debt was also refinanced from the central bank", he added.
He said that Pakistan has now entered in an agreement with IMF for a bailout package of $6 billion and as a part of IMF conditions the government cannot borrow from the SBP.
Muhammad Suhail, CEO Topline, said that the massive note printing to finance the fiscal deficit will further create issues for the economy besides fueling inflation
According to SBP, the federal government''s borrowing for budgetary support from scheduled banks witnessed a massive decline and stood negative. The federal government has retired some Rs 647 billion to scheduled banks in the last fiscal year compared to a retirement of Rs 108 billion in the same period of previous year.
The cumulative borrowing for budgetary support from the domestic sources (including SBP and banking sector) stood at 2.412 trillion from June 29, 2018 to June 28, 2019 as against Rs 1.287 trillion in the same period of FY18, showing an increase of 87 percent or Rs1.125 trillion.
On the other side, all four provinces have retired some Rs 139.272 billion to the State Bank instead of borrowing during the last fiscal year. The government of Balochistan repaid Rs 21.8 billion, the Khyber Pakhtunkhwa government some Rs 8.59 billion, the Punjab government Rs 93.57 billion and the government of Sindh Rs some Rs 7.09 billion to SBP during July 1, 2018 to June 28, 2019.
Similarly, as per latest statistics, Broad Money (M2) registered a growth of 12.23 percent during FY19 compared to 10.05 percent in FY18.
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