KARACHI: Both private and public sectors have aggressively been borrowing from commercial banks from the outset of this fiscal year, while the government is relying on State Bank of Pakistan (SBP) to meet its fiscal deficit.

The government’s borrowing for budgetary support in 1QFY19 (July to Oct 5) stood at just 28.7 per cent of the amount taken in the corresponding period of last year. The decrease in borrowing indicates government’s attempt at lowering the fiscal deficit.

The SBP report shows that the government borrowed Rs123 billion for budgetary support in 1QFY19 versus Rs428bn in same period last year.

The private sector credit off-take during the first quarter was much ahead of FY18 levels, reflecting higher participation in the economy.

The SBP reported on Tuesday that the private sector borrowed Rs113.2bn during the first quarter (up to Oct5) as against offloading of debts worth Rs58bn in the same period of FY18. Last fiscal year witnessed record private sector borrowing at Rs775.5bn. During the first quarter of the current fiscal the interest rate has gone up by 200 basis points to 8.5 per cent but the private sector kept continue higher borrowing compared to last fiscal.

Meanwhile, public sector took out loans worth Rs56.9bn in 1QFY19 against net borrowing of only Rs304 million in same quarter last year. It comes as no surprise then that the new government has talked about getting rid of such loss-making public entities.

The government borrowed Rs1.763bn from SBP in 1QFY19 and retired Rs1.472bn of commercial banks while provincial governments also retired Rs176.8bn of the central bank during the period under review.

Published in Dawn, October 17th, 2018