KARACHI: The government’s borrowing for budgetary support sharply declinedby 42 per cent in the first 10 months of the current fiscal year,indicating a trend that may result in lower fiscal deficit for the year.

The State Bank’s latest data shows the government borrowed Rs676 billionduring July-April period of 2020-21 compared to Rs1,171bn in the sameperiod last year — a decline of Rs495bn, or 42pc.

In the wake of no funding from the central bank for the last two years, lowborrowing for budgetary support indicates an improved performance on fiscalside.

On May 7, the Ministry of Finance reported that fiscal deficit aspercentage of GDP stood at 3.6pc in nine months (July-March) of FY21against 3.8pc in the same period of FY20. The deficit was 8.1 per cent inFY20 compared to 9.1pc in FY19. The government has set 7pc fiscal deficitfor FY21.

“A lot of budget deficit has been financed from external sources. That’swhy the government’s reliance on domestic sources has been lower,” saidSamiullah Tariq, head of Research at Pak-Qatar Investment Company.

Since there is no borrowing from the SBP, government borrowing fromdomestic sources was mainly through banks.

In the last quarter of FY20 (April-Jun), nearly 53pc of the budgetaryborrowing from the banking system was in the form of withdrawals fromgovernment deposits held with the central bank.

SBP’s the annual report said that as a result, while the overall fiscaldeficit increased by Rs1.7 trillion during Q4 due to Covid-19 relatedexpenditures, public debt increased by Rs1.1tr.

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