KARACHI: The State Bank reported on Tuesday that the borrowing for budgetary support since July 2012 to mid March 2013 rose to Rs911 billion with the said amount mostly borrowed from scheduled banks.
The government depends on borrowed funds to carry out day to day functions. The data of borrowings for budgetary support during the eight and half months of this fiscal year indicates it was almost as much as the tax collection during the period, the SBP noted.
The Federal Board of Revenue reported on March 8 that it had provisionally collected Rs1,155bn during July-February (2012-13).
The two comparative figures (budgetary borrowing and tax collections) showed that the revenue collections were higher by Rs245bn than borrowing made during this period.
The country has been under pressure of widening fiscal gap which was more than 8.4 per cent of GDP in the last fiscal. If the borrowing for budgetary support continues to move parallel to revenue collections, the situation would be disastrous for the economy.
Economists and analysts believe the borrowing would be much less than the tax collections at the end of the fiscal but they said the situation is precarious for the economy.
The State Bank’s report showed that the government borrowed Rs778bn from scheduled banks during the eight and half months. Since the country is heading towards general elections and it is not clear which party would form the government, the business community and bankers said the economy would continue to face instability during the next three months.
“Once a party forms government and announces its economic agenda, the economy will move in the direction adopted as strategy,” said S S Iqbal, a banker and analyst.
He said that unless the economic policies are clear, the government (now caretaker government) will continue to borrow from banks and its dependency on borrowed money would not change.
Further details of the SBP report show that the private sector failed to improve its performance related to banking borrowing given that its’ borrowing shrunk to half of what it was during the same period of last year.
The private sector borrowing during this period was Rs113bn while it was Rs257bn during the same period last year.
The credit to public sector enterprises (PSE) was entirely opposite to the trend witnessed during the last fiscal. During this period, the credit to PSE were over Rs42bn while during the same period of last fiscal the PSE retired their debt equal to Rs164bn.
“The tax revenue may see fall from the target since the manufacturing sector is still under the grip of energy crisis. The low productivity would not yield more revenues for the government,” said Aamir Aziz, a textile manufacturer and exporter.
Summing it up, he said: “Less revenue means more borrowing.”