July 1 to June 6: Govt borrowing from SBP totals Rs382b, data shows

Amount 13.4% less than previous year; reliance on banking sector reduces.

KARACHI:

Net federal government borrowings from the central bank for budgetary support have reached Rs382 billion since the start of the outgoing fiscal year, according to data recently released by the State Bank of Pakistan (SBP).

Net borrowings from the SBP between July 1, 2013 and June 6, 2014 remained 13.4% less than Rs441.1 billion that the federal government borrowed from the central bank in the comparable period of 2012-13.

As for government borrowings from commercial banks, the federal government has drastically reduced its reliance on the banking sector. Net federal government borrowings from scheduled banks until June 6 remained Rs78.8 billion. In contrast, the corresponding figure for 2012-13 was a hefty Rs832.8 billion. On a year-on-year basis, this reflects a decline of 90.5%.

It should be noted that net federal government borrowings from scheduled banks until March were actually a negative Rs91 billion in contrast with a hefty Rs777.5 billion recorded in the same period of 2012-13.

SBP data shows banks’ credit to the private sector has increased substantially in 2013-14. Credit to the private sector between July 1 and June 6 stood at Rs302.9 billion, which is more than 31 times higher than the amount of private-sector credit (Rs9.5 billion) extended in the comparable period of the last fiscal year.

Credit to the private sector touched a six-year high in the outgoing fiscal year. According to the recently released Economic Survey of Pakistan that compared monetary aggregates for the July-May period of the last many years, private sector credit remained Rs217 billion, Rs122 billion, Rs113 billion and Rs20 billion in 2011-12, 2010-11, 2009-10 and 2008-09, respectively.

The substantial increase in the amount of credit extended to the private sector is reflective of the confidence that private businesses have in the PML-N government, which is arguably more pro-business than the PPP.

Overall, money supply in the economy has increased by 8.68% since the start of the current fiscal year as opposed to the growth rate of 12.12% recorded in the comparable period of 2012-13.

The expansion in broad money – commonly referred to as M2 – between July 1 and June 6 remained Rs768.6 billion, which is significantly lower (17%) than the monetary impact of Rs926.5 billion recorded over the corresponding period of the last fiscal year.

Provisional data on monetary aggregates shows that the currency in circulation has increased by Rs293.6 billion since the start of the current fiscal year. The increase in the currency in circulation during the same period of the last fiscal year was Rs340.4 billion.

Total currency in circulation as of June 6 stood at Rs2.2 trillion, SBP monetary aggregates show.

Published in The Express Tribune, June 19^th, 2014.

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