Govt borrowing from banks climbs to Rs282bln

KARACHI: Government borrowing from banks for budgetary support surged to Rs282 billion during the first two months of the current fiscal year, the figures released by the State Bank of Pakistan (SBP) showed on Tuesday.
The government borrowed Rs20 billion from the banks in the same period of the previous fiscal year.
The public borrowing from scheduled banks was Rs262 billion, higher than in the corresponding two months of the preceding year, as the tax receipts failed to keep pace with the government spending despite recovery in the economy.
Analysts said that the numbers on the government borrowing reveal it [government] is still facing shortfall in revenues despite having foreign inflows and removal of exemptions and concessions and increase in general sales tax on petroleum products.
Though, the details of the fiscal operations by the Ministry of Finance for the first quarter of FY16 will give an accurate idea about the government’s revenue and the expenditures position, analysts believe the expenditure are still witnessing an uptick despite reduction in subsidies [adjustment in electricity tariffs], high gas revenues [under Gas Infrastructure development Cess and lower interest payments on its domestic debt.
The Federal Board of Revenue (FBR) has collected Rs143 billion during July 2015 against the collection of Rs133 billion in the same month of FY15.
There has been not a letup in the government borrowing requirements from commercial banks. The reasons included the government securities are the most preferable option for the banks to park their money into as the fiscal authorities raise money from the banks through the auctions of market treasury bills and Pakistan investment bonds to meet its meet its spending requirements and retire its debt from the State Bank.
The government has been mandated to meet the limit of zero quarterly net borrowing from the central bank under the amended SBP Act 1956.
“Borrowing from the banking sources set to remain higher over this fiscal year to come in at around Rs1.5 trillion, an analyst said.
“There is scope for the borrowing to come down than we expect during this year in case the government narrow the gap in expenditure and revenues by increasing its tax and non-tax take, and keep the fiscal deficit at the manageable level,” he said.
To bridge revenue deficit, the government has budgeted bank borrowing of Rs283 billion during the current fiscal year.
Bank borrowing reached Rs1.4 trillion in FY15.
The FBR has fixed the tax collection target of Rs3.104 trillion for the ongoing fiscal year against the revenue collection of Rs2.588 trillion for the last year.
The government fixed 4.3 percent budget deficit target for the current fiscal year.
Budget deficit stood at 5.3 percent of GDP in FY15 higher against the revised five percent of GDP due to substantial increase in the budgetary borrowing. Budget deficit was 5.5 percent in FY14.
Contrary to the government borrowing, the uptake of private sector credit remained slow. Banks lent Rs12 billion to the private sector during July-August FY16 against Rs17 billion last year.