Karachi: The government borrowing for financing of fiscal deficit has increased the interest payment to 58.5% of net revenue during FY11.
According to the Alfalah Securities Limited, the allocation of PKR 699 bn for interest payments in FY11 has increased to PKR 727 bn in order to finance the fiscal deficit and high interest rates by the SBP. The total estimated net revenue available to the government is PKR 1242 bn out of which PKR 993 bn has been transferred to provinces against interest payments of PKR 727 bn in FY11. The financing cost rose due to borrowing by the government for financing of fiscal deficit and high interest rate by the State Bank of Pakistan to tame the inflation. The financing of the deficit led the SBP to keep interest rates high which held an adverse impact on the private sector credit offtake.