KARACHI, Sept 24: The government has made aggressive borrowing from the State Bank of Pakistan (SBP) in the first 66 days of the current fiscal year for its budgetary support.

The central bank reported on Wednesday that the government borrowing from the SBP stood at Rs162.5 billion during the period under review, which is more than double when compared to Rs73 billion borrowed in the same period last year.

However, the massive borrowing made by the government has exposed its tall claims that in the current fiscal year it will pay back all the SBP money borrowed during last fiscal year.

Last year, the government pumped Rs689 billion in the economy through borrowing from the State Bank, which has resulted in record high inflation soaring to 25 per cent.

”The data shows that the State Bank is still busy in printing notes for the government and this is being done without protest,” said an analyst.

The central bank had been critical about the government borrowing last year and warned that the excess borrowing would be resulted into high inflation that would hit the entire economy.

The PPP-led government, which took charge in March this year, vowed not to go for borrowing from the SBP and instead would borrow from other sources like launching of new bonds, higher mobilisation through National Saving Schemes, etc.

Almost a quarter of the current fiscal is now over, but no government bond has so far been launched to mobilise excess liquidity.

A research analyst said the monetary growth during the first 66 days was much below than what was recorded in the same period of last year. However, the impact of printing of notes will not allow inflation to come down.

The State Bank reported that the monetary growth during the period under review was (minus) 1.37 per cent against 0.49 per cent of the same period last year.

”But this lower monetary growth was mainly because of poor growth of foreign exchange inflows,” said the analyst.

Net Foreign Assets of the banking system grew to (minus) Rs118 billion against (minus) Rs12.2 billion of the corresponding period of the last year.

The State Bank said the government financed its entire deficit of fiscal 2007-08 through borrowing from the SBP.

The current trend shows that the government is moving on the footprints of the previous government which argued that due to political instability it had to make huge borrowing from the SBP.

“It is possible to change this trend but it can only happen if the government shows its willingness and devise strategy to deviate from this kind of inflationary borrowing,” said the research analyst.