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The situation seems to remain unchanged in near future; instead it could be further deteriorated as the government’s reliance on borrowing has been rising due to serious shortage of revenue generation.

 

KARACHI: The government has planned to borrow Rs575 billion from banks during the 3rd quarter of the current fiscal, Jan-March, FY12.

The State Bank on Tuesday announced a massive borrowing plan of the government through auctions of treasury bills.

The government has been borrowing continuously from the banking system to avoid borrowing from the Central Bank which is inflationary in nature.

However, the borrowing from commercial banks crowded out the private sector, which hurt the economic growth.

The stock of borrowing from commercial banks at the end of June 2011 was Rs1.663 trillion. Since July to mid December, the government has so far borrowed Rs630 billion from the commercial banks.

The situation seems to remain unchanged in near future; instead it could be further deteriorated as the government’s reliance on borrowing has been rising due to serious shortage of revenue generation.

It is not only bad economic performance which limited the scope for better revenue generation, the corruption within the tax collection body is also a reason for low revenue.

At the same time rising debt demands more revenue for debt servicing. It means more money required for day-to-day expenses even if development programmess are ignored.


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