WEDNESDAY MAY 04: Government borrowing crosses Rs 500 billion mark: 81 percent phenomenal rise

KARACHI: The federal government's borrowing for budgetary support posted a phenomenal increase of 81 percent and crossed Rs 500 billion mark on April 23, 2011, mainly due to shortfall in revenue collection.
"Less than target revenue collection and healthy increase in current expenditures are responsible for the substantial budgetary borrowing during the current fiscal year," bankers said, adding that now the government is compelled to borrow from the central bank to meet its requirements.
The International Monetary Fund (IMF) has already shown its serious concern over the rising government borrowing for budgetary support and asked for the cut in borrowing. However, despite the Fund's objection, the borrowing has remained on higher side, they said. It would create more difficulties for financial side, they added.
"The high borrowing from the banking system reflects that the government is still relying on bank borrowing for budgetary support due to below target revenue collection, besides slow privatisation process," they said.
The State Bank of Pakistan on Tuesday said that borrowing for budgetary support by the federal government stood at Rs 510.605 billion during period from July 1, 2010 to April 23, 2011, as compared to Rs 281.672 billion in corresponding period of last fiscal year, depicting a very big increase of Rs 229 billion.
The borrowing by federal government included Rs 256 billion from the Sate Bank and Rs 253 billion from other banks. The federal government borrowing from SBP surged by 238 percent, or Rs 181 billion, to Rs 256.792 billion on April 23, 2011, against Rs 75.798 billion in same period of last fiscal year.
Borrowing from scheduled banks witnessed an increase of 23 percent during the period. The federal government borrowed from scheduled banks Rs 253.813 billion against Rs 205.874 billion of last year. On the other side, provinces during the period presented strengthened financial health as all four provinces made some retirements. Bankers said high borrowing from scheduled banks as compared to the borrowing from central bank depicts that the central bank is shifting the borrowing to the scheduled banks by selling more treasury bills.
During the period under review, provinces repaid total Rs 60 billion to the State Bank. Government of Balochistan retired Rs 24.54 billion, KP Rs 12 billion, Punjab Rs 10.173 billion and Sindh repaid Rs 13.191 billion during July 2010 to April 23, 2011.
Cumulatively, federal and provincial governments' borrowing for budgetary support registered a surge of Rs 196.78 billion to Rs 455.472 billion on April 23, 2011. As per latest statistics, Broad Money (M2) registered a growth of 9.34 percent during July-April of fiscal year 2011 as compared to 5.52 percent growth in the corresponding period of last fiscal year.