According to SBP first quarterly report, government borrowing from the banking system up to end-November 2011 was Rs 736.8 billion, against Rs 336.1 billion in the corresponding period last year.
This amount includes Rs 391.0 billion borrowed from banks to retire PSE debt, which has now been transferred on to the government's books, it said, adding that unfortunately, PSEs continue to haemorrhage as a credible restructuring plan has not been put into action. As a result, circular debt issue is likely to persist, the report said.
This is, indeed, an alarming situation. The government, therefore, is required to decrease its reliance on bank borrowings with a view to allowing private sector get its share in the credit pie. Insofar as performance of PSEs is concerned, no plan will work except for privatisation plan.