KARACHI, May 14: At the end of 10 months of the current fiscal year, budgetary borrowing is about to touch Rs1 trillion mark, which would be a challenging situation for the next elected government.

The caretaker government during its tenure made efforts to reduce borrowing for the budgetary support while the State Bank during the same period discouraged banks from parking their liquidity into government papers.

The returns on treasury bills were revised down, a trend that is expected to continue as inflation is falling.

The State Bank reported on Tuesday that budgetary borrowing during the last 10 months rose to Rs988bn.

Though the figure is too big, it was even bigger last year when budgetary borrowing had crossed Rs1 trillion mark during the corresponding period last year.

Money dealers said that the government reduced borrowing during the last one-and-a-half months whose impact was also visible.

They said borrowing would have crossed Rs1tr, had it been made at the earlier pace.

“In the last auction, the State Bank did not raise liquidity as per target set for the T-bills,” said a money dealer in the banking industry.

The State Bank had set Rs250bn as target for T-bills in the auction held on April 30, but total money raised was Rs150bn.

“The auction scheduled on Wednesday would show that the government would raise less than the target money,” said S S Iqbal, a money expert in a local bank.

According to the State Bank, the government plans to raise Rs200bn on May 15 auction and the maturity of the T-bills the same day would be Rs177bn.

Money market dealers said the government may raise less than the target.

They said that the change may occur once the newly-elected government takes charge of the financial affairs and introduce new strategy.

Bankers believe the caretaker government reduced borrowing through T-bills as it stopped payments for many large projects funded by the federal government and the decision was possibly taken in the wake of general elections and formation of new government in Islamabad.

Bankers and some analysts said the record growth activities in the share market could be a welcoming sign for the new government which may spur growth in other segments of economy.

Though the previous two governments of Nawaz Sharif could not make any major breakthrough for economy, many businessmen and bankers were hopeful that the new government would adopt long-term strategy to reduce debt burden, both domestic and external loans.

The government has been repaying loans taken under the standby agreement with the IMF. Economists started suggesting that a new agreement with the IMF is a must to save the country from default on external account.