KARACHI, June 15: Between July-May 2003-04 the government had to borrow from the banking system Rs64.8 billion-more than four times the target of Rs15 billion set in the credit plan of this fiscal year. This amount is more than double the initial target of Rs28 billion set in the 2003-04 budget.

In the 2004-05 budget, the government has revised its estimate of bank borrowing for fiscal year July/June 2003-04 to Rs74 billion and has set Rs45 billion target for the next fiscal year.

The latest data released by the State Bank shows that between July/May 2003/04 the government borrowed Rs64.8 billion from the banking system to fill in the gap between income and expenses.

In the comparable period of last fiscal year, the government had retired Rs59.9 billion bank credit instead of making any fresh borrowing. The government was forced to borrow more from the banking sources not because of any fall in its revenue or non-revenue income.

What forced it to do so was a decline in its external receipts and the provincial cash balance. The budget document 2004-05 that also contains revised estimates of income and expenses accounts of 2003-04 shows that net revenue receipts including tax and non-tax revenue is likely to reach closer to Rs550 billion against the target of Rs513 billion.

Net revenue receipts are obtained by adding tax revenue collected by Central Board of Revenue and other sources as well as non-tax revenue and subtracting from the sum of these figures the share of provinces in taxes.

The budget document further shows that net capital receipts are also expected to touch Rs398 billion mark against the target of Rs367 billion. Similarly the volume of self-financing of Public Sector Development Programme or PSDP is also expected to be more than Rs34.8 billion against the target of Rs30 billion.

More importantly the income from privatization of state-owned units is also projected to reach Rs110 billion against the target of Rs100 billion. The budget document projects a shortfall in two sources of federal income i.e. its net external receipts and provincial cash balances.

External receipts are likely to fall to Rs145 billion at the end of this fiscal year against the target of Rs159 billion. Similarly the provincial cash balances with the government are projected to decline to Rs143 billion from the targeted level of Rs280 billion.

On the expenses side what forced the government to borrow more from the banking system was not an increase in its development expenditure but current expenses. Development expenditure is projected to reach Rs154 billion at the end of this fiscal year slightly lower than the target of Rs160 billion. But current expenses are likely to reach Rs714 billion against the target of Rs645 billion showing an increase of about 11 per cent or Rs69 billion.

That the current fiscal year is going to end up with current expenses exceeding the target by 11 per cent indicates that the level of fiscal discipline is falling. What makes the situation look more disturbing is that this increase stems primarily from a phenomenal rise in expenses on general public services that are likely to reach Rs448 billion from the target of Rs377 billion.