KARACHI, April 14: The government has sharply increased its borrowings for the budgetary support, but most of the burden was put on scheduled banks instead of the State Bank.

The latest figures, issued by the State Bank revealed that the monetary growth has taken another sharp jump to reach 11.22 per cent during the first nine months of the current fiscal.

The government borrowed Rs123 billion for the budgetary support despite higher than targeted revenue receipts through taxes.

The government had borrowed just Rs61 billion during the nine months of the last year.

This must be concerning for the monetary authorities that the monetary growth has picked up pace and the rate with which it has been increasing, would easily go beyond the target set by the State Bank.

For the year 2006-07, the State Bank had set 13.46 per cent monetary growth, but in the nine months the growth reached 11.22 per cent.

“The last quarter of the current fiscal is crucial for economy and it will establish the rate of monetary growth which will reflect inflationary pressure on economy,” said an analyst.

He said the inflation would certainly go beyond the revised target of 7.5 per cent.

“Money supply is higher than last year and the government borrowing is much higher than previous nine months’ borrowing. This would lead to higher supply of money causing inflation,” he said.

Both the government and the State Bank have been emphasising that the core inflation was gradually coming down, but they were unable to explain the rising trend for main inflation, that is consumer price index.“The last quarter will see more money into the system and more borrowing by the government to meet its expenditure enlarging due to huge expenses on law and order situation,” said another analyst.

He said the coming general elections expected by the end of this calendar year would require more expenditure which may reduce actual expenditures on development projects.

“Elections require huge sum of money and is a very expensive game. The government certainly needs more money to meet these expenses or introduce some cut in the next budget,” he said.

Analysts believe that the government would go for further borrowing in the last quarter of the current fiscal that would distort almost all monetary targets, including inflation set for the year.

However, this time the government changed its borrowing trend and accepted the State Bank’s frequent request not to rely on State Bank for borrowing. But the borrowing could not be diversified as advised by the SBP. The government failed to issue bonds to borrow from the market. It borrowed mostly from the scheduled banks.