KARACHI: The government borrowed 26 per cent more for budgetary support during the first 10 months of this fiscal year, as compared to same period of 2017-18.

According to the State Bank of Pakistan’s latest data, the government borrowed Rs1,073 billion during July-April (up to Apr26) as against Rs850bn in corresponding period last year, representing an increase of Rs223bn or 26.2pc.

Despite the rise in budgetary borrowing, monetary expansion stood lower than last year, indicating that not sufficient liquidity has been supplied to the economy for better growth. The International Monetary Fund predicts 2.9pc growth rate while the World Bank said estimated.4pc while SBP figures range from 3.5-pc for FY19.

The total amount borrowed for budgetary support in 2017-18 amounted to Rs1,110bn, which is just slightly above the latest 10-month figures.

The government is expected to face a shortfall of Rs350bn revenue by the end of this fiscal year. Such a massive gap compelled it to change the head of the Federal Board of Revenue (FBR), in the hopes of improving the collection.

Moreover, the new report also indicates that the government’s trend of borrowing from the SBP and retiring debts of scheduled banks continued. During the period, government borrowed Rs3.475tr during 10MFY19, soaring by 151pc over Rs1.382tr in same period last year - a jump of Rs2.093tr.

However, it did not borrow from scheduled banks and kept retiring debts throughout the year. The government’s debt retirement to banks surged over 400pc to Rs2.108tr , from 416bn.

The previous finance minister Asad Umar was of the view that the government wants to keep the banks liquid so that the private sector could get benefit out of this liquidity.

Financial circle believes that once a deal is finalised with IMF, the government would not be able to borrow more as aggressively due to conditionalities on fiscal management. The burdget deficit for this fiscal year is expected to cross 6pc of GDP, which is well over the target.

Published in Dawn, May 8th, 2019