Data shows gradual shift towards commercial banks to meet expenditures. CREATIVE COMMONS
The federal government’s net borrowing from the State Bank of Pakistan (SBP) for budgetary support amounted to Rs725.5 billion during July 1 and January 24 in the current fiscal year, according to data released by the central bank on Tuesday.
It stood at a negative Rs147.5 billion during July 1, 2012 and June 25, 2013, which reflects a significant monetary impact of government borrowing for budgetary support in the last seven months.
The government has gradually reduced its borrowings from the SBP in recent months while increasing its reliance on commercial banks mainly through selling market treasury bills.
Net government borrowings from the SBP stood at Rs685.8 billion between July 1 and December 13. They amounted to more than Rs800 billion until November 27.
According to SBP data, currency in circulation increased to Rs2.1 trillion as of January 4, up 11.8% from Rs1.9 trillion at the end of fiscal year 2012-13. This means the increase in the currency in circulation between June 30 and January 24 stood at Rs230 billion, as opposed to Rs261 billion in the corresponding period of the previous fiscal year.
Credit to the private sector increased by Rs256.6 billion during the period under review as opposed to Rs94 billion in the corresponding months of the preceding year.
Similarly, credit to public-sector enterprises amounted to Rs57.2 billion during June 30 and January 24 in contrast with Rs40.3 billion in the same months of the preceding year.
Broad money, which is a measure of money supply in currency and other liquid forms, stood at Rs9.2 trillion on January 24, up 4.1% from the beginning of the fiscal year. In contrast, growth in broad money was 7.1% over the comparable period of previous fiscal year.
Analysts have repeatedly voiced concerns about increased government borrowing to meet expenditures, especially the printing of excess currency as they fear this will fuel inflation. The shift away from the central bank towards private banks for government borrowing is a welcome change in this regard.
Published in The Express Tribune, February 6th, 2014.
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The question is why did SBP allow this crazy borrowing>. SBP is as much to be blamed as the Government
This reminds me of the movie "Back to the Future". To figure out not to do a foolish act we travel back in time to repeat it. So go our Babus and their Fake degree holder Masters.