Govt borrows Rs939bln from SBP

KARACHI: The government borrowed Rs939 billion from the central bank between July 1 and August 19, but it repaid Rs117 billion during the same period, official data showed on Tuesday.

Government borrowing from the State Bank of Pakistan (SBP) continued to advance since the beginning of FY17 after the country exited from the International Monetary Fund (IMF)-supported extended fund facility programme.

Presently, the central bank is providing liquidity to the government to finance its budget related expenditures, following revenue shortfalls and increased public spending. The government, in an understanding with the IMF, was following a policy of curtailing borrowing from the central bank since 2008.  

The government ensured the Fund many times that it would use non-SBP domestic sources to meet its financing needs. This strategy was based on advance planning of quarterly budget-related borrowing requirements. It also increased the frequency of treasury bills and Pakistan Investment Bonds to expand and enhance available financing option for the budget spending.  

The public finances are not encouraging as tax revenues remained below the desired level across the board. Moreover, deteriorating prospects for the external inflows is also underpinning the fragility of public finances so far.    

The government is frequently raising funds through Pakistan Investment Bonds and treasury bills from commercial banks.   The government borrowed Rs737 billion (quarter to date) against a maturity of Rs 1.5 trillion. It appears to be struggling to reduce budget deficit in line with 3.8 percent of gross domestic product target set for FY17.