Government makes huge borrowing from scheduled banks

KARACHI: The government’s borrowing from central bank and scheduled banks is on the rise for meeting its expenses, swelling to Rs 698.314 billion in the recent days, the State Bank of Pakistan (SBP) reported on Wednesday.

The government’s borrowing stood at Rs 44.84 billion from the central bank for budgetary support from July to November 25 of 2011 as compared with Rs 251.310 billion loans transferred to it in the same period of last financial year.

The current borrowing is almost 71.8 percent of the loans amount recorded in the past fiscal year. The government made this borrowing but it retired a substantial amount to the central bank in the past couple of weeks as previous borrowing stood at Rs 69.88 billion till October 28.

The borrowing from central bank was observed under-controlled from the government’s side that resulted in cut in discount rate in the previous monetary policy announcement.

Moreover the government’s borrowing from commercial banks has been unabated particularly through Term Finance Certificates (TFCs), Pakistan Investment Bonds (PIBs) and treasury bills (T-bills) since the start of the current fiscal year.

Its borrowing from the commercial banks stood at Rs 653.74 billion from July to November 25, which stood at Rs 54.627 billion in previous year.

The government’s borrowing crossed the limit of Rs 308 billion that it set for the commercial banks in the current fiscal year.

Analysts said that the government would continue borrowing from the banking system to support fiscal operations. The borrowings from scheduled banks are mainly through fortnightly auctioning of T-bills and PIBs of 3, 6 and 12-month maturities.

It continued to auction T-bills and PIBs for combating crisis in the energy sector’s circular debt and public sector entities such as Pakistan Railways and Pakistan Steel.

Alone, the TFCs transaction was swapped into T-bills and PIBs worth Rs 390 billion.

The private sector credit has decreased sharply as its data shows it deposited Rs 218.801 billion with commercial banks as interest and assets in the five-month period.

The private credit showed that negative growth in last year stood at Rs 24.69 billion.

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