KARACHI: The government borrowing to finance its budgetary deficit vaulted58.48 percent during the last fiscal year as the gap between spending andrevenues continued to widen owing to a huge shortfall in receipts, officialfigures showed on Friday.
Stats released by State Bank of Pakistan showed the borrowing reachedRs1.439 trillion in the FY2018 compared to Rs908 billion borrowed in2016/17.
The SBP’s data revealed that during the last fiscal year net borrowing bythe government sector, comprising four provincial, Azad Jammu & Kashmir andGilgit-Baltistan government was also higher than it was a year ago.
On the other hand, the government borrowed Rs1.495 trillion from thebanking system during the last fiscal year, which was 32 percent higher,compared to the borrowing in the same period of previous year.
However, the government repaid Rs76.754 billion to commercial banks inFY2018 against the borrowing of Rs179.3 billion during 2016/17.
Analysts say commercial banks, owing to higher interest rates expectations,are just interested in lending to the government on a short-term basis,which is not suitable for the government that needs cash for a longertenure.
Dr Ashfaque H Khan, the dean at NUST School of Social Sciences, saidToday’s deficit indicated an unfavourable trend in the public financesduring the last fiscal year.
“It looks clear that there will be a challenging fiscal environment for thenext government.
The IMF’s forecast of the budget deficit of 6 percent of gross domesticproduct for 2017/2018 will be overshot,” Khan said adding the deficitreached over 6.1 percent in the second week of previous month.
The SBP has also been asked to stop clearing government cheques in order tocurb deficit from further increase.
Many analysts expect the budget deficit could be 7-8 percent of GDP duringthe last fiscal year amid increasing development and elections spending.
The central bank will auction Rs5.550 trillion worth of Market TreasuryBills (MTBs) and Pakistan Investment Bonds (PIBs) both fixed and floatingin the first quarter of current fiscal year to help the government financebudget deficit, according to auction target calendar issued by the SBP onlate Thursday.
The government has already proposed a 73 percent year-on-year increase inborrowings from local banks (up to Rs1 trillion) for FY2019.
The SBP sold Rs331 billion worth of treasury bills against the target ofRs1.5 trillion at an auction on Wednesday, with lower participation frombanks. The acceptance was mainly concentrated in the three-month category.
Analysts believe the renewed interest in short-term papers to be a sign ofheightened expectations of continuing aggressive rate reversals by the SBP,especially as inflation continues gather pace along with fears of anotherpotential devaluation in in the coming months on the cards.
The SBP’s data also showed that broad money supply saw an expansion of10.59 percent during last fiscal year, compared with 13.69 percent in thecorresponding period of previous year.
Furthermore, credit to the private sector rose to Rs769 billion during2017/18 from Rs747 billion a year earlier.