KARACHI: Borrowing by the government for budgetary support increased 27 per cent year-on-year in the first 98 days of 2017-18, the State Bank of Pakistan (SBP) reported on Tuesday.

Borrowing during July 1 and Oct 6 amounted to Rs479 billion compared to Rs376bn in the same period a year ago.

The government borrowed from both scheduled banks and the SBP. This reflects the government’s attempt to maximise growth in view of general elections due by the middle of 2018.

During the period under review, the government borrowed Rs443bn from the SBP compared to Rs673bn a year ago.

The government almost stopped borrowing from the central bank last fiscal year. Its total borrowing from the SBP was Rs710bn in 2016-17.

This means the government borrowed only Rs37bn from the SBP in the remainder of 2016-17. Scheduled banks fulfilled the government’s need for further liquidity by providing it with Rs361bn in 2016-17.

The latest SBP report showed the federal government has so far borrowed Rs196bn from scheduled banks against a net retirement of Rs278bn a year ago.

Private-sector credit off-take may decline during the current fiscal year if the trend persists. The SBP report shows private-sector borrowing is still negative so far in 2017-18 as it retired Rs56bn until Oct 6.

The private sector borrowed Rs747bn in 2016-17, up 67pc from the preceding year.

However, analysts believe the government may not increase its borrowing rapidly in the next quarter. Revenue generation in the first quarter increased substantially, which restricted the fiscal deficit to just 0.9pc of GDP over the three-month quarter.

Published in Dawn, October 18th, 2017