KARACHI: Contrary to the expectations, the government’s borrowing remained lower than last year at the end of third quarter of FY18.

From July to March 23 FY18, the government borrowed Rs620 billion from the State Bank of Pakistan for budgetary support as against Rs739bn in the same period of 2016-17.

Unlike the expectations of some independent economists, the government has yet not started spending lavishly for cosmetic improvement of the economy to build its political image as the general elections approach.

The SBP report showed that the government spared the scheduled banks for its borrowing and depended solely on the central bank.

The federal government’s debt retirement of scheduled banks during these nine months was Rs418bn, versus just Rs102bn in FY17.

The government did not get support from foreign inflows expected to support the budget as report shows the net foreign assets of the banking system noted a growth of Rs415bn compared to negative growth of Rs258bn. The nine-month net foreign assets of the banking system were even higher than the negative growth of Rs405bn during the entire last fiscal year.

It also revealed that the private sector credit off-take during this period went higher by Rs18bn to Rs388bn, reflecting the growth was not high enough to help increase and sustain the higher economic growth rate.

The State Bank kept the interest rate unchanged at 6 per cent in the last monetary policy, allowing the private sector to benefit from cheaper cost of borrowing. It was expected that the interest rate would increase in the wake of the two rupee devaluations by a cumulative 9.5pc during the last four months.

However, there was no boost in the borrowing from the private sector, indicating that uncertainty on political front was discouraging them to benefit from the currently low interest rate scenario.

The last quarter of FY18 has just started and overlaps with last quarter for the ruling party’s term before general elections.

Published in Dawn, April 5th, 2018