KARACHI: Credit to public-sector enterprises (PSEs) crossed Rs53 billion in the first five months of 2016-17, which is 4.6 times higher than the credit availed during the same period of the last fiscal year.

The trend reflects the massive losses being made by public-sector units.

The State Bank of Pakistan (SBP) reported on Tuesday the borrowing for PSEs rose to Rs53.69bn in the first five months of the current fiscal year, although it was just Rs11bn a year ago.

The government failed to address the issue of loss-making PSEs, particularly Pakistan Steel, PIA and Pakistan Railways. Neither the privatisation of these PSEs could be initiated nor could their losses be curtailed. Instead, their losses have grown many times during the current fiscal year.

The government has set another record of borrowing from the SBP. Its borrowing crossed Rs1 trillion in the five-month period. The changed pattern of the government borrowing was visible from the beginning of the current fiscal year, but its huge size is unexpected for most analysts.

In contrast, there was a net retirement of the government borrowing from the SBP amounting to Rs170bn in the same period of 2015-16.

Although the government borrowing from commercial banks was less than market expectations, its overall borrowing for budgetary support increased 78 per cent in five months.

The SBP reported the government borrowing for budgetary support rose to Rs377bn compared to Rs211bn a year ago. This indicates an increasing fiscal gap, which has been a bone of contention between the IMF and the government.

Massive government borrowings from the central bank were an issue for the IMF as the international lender pressured the government to stop the practice in the last three years.

However, the government is no more bound to follow the recipe of tightening monetary policy after the completion of the IMF programme.

Analysts expected the government’s small borrowing from scheduled banks would benefit the private sector. However, the SBP’s latest report showed the private-sector borrowing remains low. Credit to the private sector during the five months was Rs18bn compared to Rs28bn a year ago.

The government claims to have achieved high economic growth in the last fiscal year and expects a better performance in 2016-17. But the private-sector participation seems to have lost the track. The small volume of private-sector credit off-take means low domestic investment, which hinders high economic growth.

Published in Dawn December 7th, 2016