KARACHI: Government borrowing from the commercial banks shot up over seven-fold to Rs1.249 trillion during the last fiscal year of 2014/15, the central bank said on Tuesday. The government borrowed Rs169 billion to in the fiscal 2013/14 to fund its budget deficit. Analysts said government’s claims of keeping fiscal deficit below five percent appeared unrealistic after a drastic jump in budgetary borrowing from the banks due to weaker-than-expected tax revenue, caused by fall in oil prices and lower inflation. The government initially forecasted borrowing of Rs402.373 billion during the last fiscal year ended on June 30. Analyst said the government’s borrowing stubbornly remains higher despite availability of funds from external resources. The shore up in borrowing will also push up the public debt in coming months. They said the set target for the budget deficit of 4.3 percent for the current fiscal year is little unrealistic. The government is hopeful to meet the target on account of expected better economic growth this year. To bridge revenue deficit the government has budgeted bank borrowing of Rs 282.9 billion during the current fiscal year. According to latest monetary aggregates, the government sector borrowing reached Rs1.05 trillion between July 1, 2014 and June 26, 2015 as against Rs374.8 billion during the same period last year. The government borrowed Rs980 billion from the banking system while it paid back Rs227 billion to the central bank in the fiscal 2015. Commercial banks’ investment in government securities increased to Rs5 trillion during July-May FY15. Throughout this period, commercial banks participated aggressively in primary auctions of longer-term securities as they anticipated a cut in the policy rate and also took advantage of the healthy term premium on PIBs. This enabled the government to contain its borrowing from SBP within the ceiling agreed with the IMF and meet the limit of zero quarterly net borrowing from the central bank under the amended SBP Act 1956. Significant government borrowing from commercial banks, partly contributed to low private sector credit off-take, which was Rs163 billion during FY15, compared with Rs 378 billion in the same period last year.
