Credit to the private sector between July 1 and May 2 stood at Rs320.2 billion, up a massive 126% on a year-on-year basis. PHOTO: FILE
Net federal government borrowings from the State Bank of Pakistan (SBP) for budgetary support are now in the negative territory, with the central government having retired as much as Rs85.7 billion debt since the beginning of the current fiscal year, according to the latest data released by the SBP on Tuesday.
Net borrowings from the SBP for budgetary support in the comparable period of the preceding fiscal year were Rs436.1 billion.
Speaking to The Express Tribune, BMA Capital Director of Research Azfer Naseem said the shift in the government’s borrowing pattern is due to its reduced reliance on local sources of financing.
The issue of Eurobonds worth $2 billion along with the auction of the next-generation telecom spectrum fetching $1.1 billion have led the government to lower its dependence on borrowing from the SBP as well as commercial banks, Naseem added.
The government ran a budget deficit of 2.2% of gross domestic product (GDP) in the first half of 2013-14. Although the budget deficit for 2012-13 was 8.8%, BMA Capital estimates it will remain 5%-6% for the current fiscal year.
Like the federal government’s borrowing from the central bank for budgetary support, its borrowing from scheduled banks also decreased, albeit slightly, after remaining in the negative territory for many months in the current fiscal year.
Net federal government borrowings from scheduled banks in the current fiscal year (until May 2) clocked up at Rs590.5 billion, down 6.7% from the corresponding period of the preceding fiscal year. It should be noted that net federal government borrowings from scheduled banks until March 21 were actually a negative Rs91 billion as opposed to Rs777.5 billion borrowing recorded in the same period of 2012-13.
SBP data shows banks’ credit to the private sector has gone up significantly in the current fiscal year. Credit to the private sector between July 1 and May 2 stood at Rs320.2 billion, up a massive 126% on a year-on-year basis. The corresponding figure during the same period of 2012-13 was only Rs141.6 billion.
Overall, money supply in the economy has increased by 6.1% since the start of the current fiscal year as opposed to the increase of 9.7% in money supply recorded in the comparable period of 2012-13.
The expansion in broad money – commonly referred to as M2 – between July 1 and May 2 remained Rs542.5 billion, which is significantly lower than the monetary impact of Rs741.3 billion recorded over the corresponding period of the last fiscal year.
Provisional data on monetary aggregates shows the currency in circulation has increased by Rs175.3 billion since the start of the current fiscal year.
Published in The Express Tribune, May 14th, 2014.
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