Some analysts see the economy in deep trouble as they identified a number of factors that are not favourable for growth. They said foreign factors are more important and are casting negative impact. - File photo

KARACHI: The State Bank reported on Wednesday that government’s budgetary support borrowing for the first time touched the mark of Rs1 trillion, which is half of the entire targeted budget revenue for the current fiscal year.

The government is desperately generating liquidity from all possible sources, whether from banking system or increasing taxes on petroleum products and natural gas.

According to SBP, borrowing for budgetary support in less than nine months of the current fiscal year rose to Rs1 trillion, much higher than the borrowing worth Rs374 billion made during the same period of previous year.

The ailing economy is unable to generate revenue while government’s spending is not under control.

Though government still hopes a better economic growth this year compared to last year, analysts said the current year could be another year of failed economic strategy and growth.

The negative impact of massive borrowing from commercial banks and State Bank is visible in the face of increasing inflation in March.

Along with core inflation, the main inflation (CPI) increased by 1.2 per cent in March compared to February inflation.

The trend indicates that the main inflation might see more increase as government borrowing from Central Bank has increased substantially.

The government borrowed Rs292 billion from State Bank compared to Rs112 billion during the corresponding period of last year.

The situation is even worse in case of borrowing from commercial banks. The government has, so far, borrowed Rs691 billion through banks.

The State Bank announced on Monday that government plans to borrow Rs1in the 4th quarter through banking system by selling mainly treasury bills, Pakistan Investment Bonds and Sukuk Bonds.

“This is a complete failure of economy as dependence on borrowing is becoming a major part of the revenue for the government,” said Mohammad Imran, an analyst on banking.

He said the high rate of joblessness, poor investment, no foreign investment and law and order situation are enough to cut size the economy and economic efforts of both the government as well as private sector.

Some analysts see the economy in deep trouble as they identified a number of factors that are not favourable for growth. They said foreign factors are more important and are casting negative impact.

“The government’s failure to materialise the budgeted foreign sources, drying up of foreign direct investment, soaring relations with the IMF and United States and falling exports are some of the reasons that stopped the economic progress,” said a senior banking investor whose bank invested most of liquidity into government papers.

The banker was reluctant to identify domestic reasons for high growth in government borrowing as they earn profits by lending to the government.