KARACHI: Record borrowing by the government from scheduled banks doubled the monetary expansion during the first nine months of this fiscal year.

The latest data issued by the State Bank of Pakistan (SBP) on Tuesday showed the broad money (M2) growth during the current fiscal year was 6.04pc compared 3.16pc in the same period last fiscal year.

In terms of liquidity, M2 increased by Rs1.074 trillion compared to Rs505 billion last year reflecting high inflationary pressures in the economy.

Government borrowing from the scheduled banks was one of the key factors behind monetary expansion.

The SBP data showed that the government borrowed Rs1.648tr from scheduled banks during the said period against a net debt retirement of Rs2.034tr in the same period last fiscal year.

However, budgetary borrowing by the federal government during the period under review was Rs695bn compared to Rs1.062tr last year. The government retired Rs891bn to the SBP compared to a net borrowing of Rs3.136tr in the same period last fiscal year.

Another factor which accelerated the monetary expansion was the net foreign assets of the banking system which rose to Rs987.8bn against a loss of Rs912bn of last year.

However, the net domestic assets of the banking system fell to just Rs86bn compared to Rs1.418tr of last year. The currency in circulation as of March 20 rose to Rs628.5bn compared to Rs387bn in the same period last year.

Published in Dawn, April 1st, 2020