KARACHI, Sept 28: The federal and provincial governments borrowed Rs32.8 billion from the banking system in July 2004, the first month of this fiscal year, against the full year target of Rs45 billion.

According to the data released by the State Bank, the government sector borrowing for budgetary support totalled Rs32.8 billion in July 2004, slightly less than about Rs34.2 billion in July 2003.

According to the annual credit plan for this fiscal year, government borrowing for meeting the gap between budgeted incomes and expenses must remain at Rs45 billion.

The data show that private sector credit totalled around Rs4 billion in the first month of this fiscal year. In the same period of last fiscal year, it was at minus Rs2.2 million. That is, there was a net contraction of Rs2.2 billion in private sector credit off-take in July 2003.

Senior bankers say private sector credit picked up pace in August-September adding that the end-August or end-September volumes of private sector credit would be much higher.

According to the credit plan for fiscal year July-June 2004-05, the indicative target for private sector credit is Rs200 billion but the State Bank encourages banks to meet the actual borrowing requirements of the private sector, regardless of the target.

The break-up of the government borrowing shows that the federal government did borrow a little more than Rs30bn whereas the provincial governments borrowed a little less than Rs2.8bn.

The banking system saw a net contraction in credit to public sector enterprises or PSEs during July 2004 as they retired Rs10.8 billion. Of them six major PSEs namely Wapda, KESC, OGDC, PTC, PIA and Pakistan Steel retired Rs1.4bn and all the others did retire the remaining Rs9.4 billion. What enabled the major PSEs to retire bank credit was an improvement in their financial condition as a result of their quarterly financial improvement plans.

SBP data show that Net Domestic Assets or NDA of the banking system expanded by Rs12.3bn in the first month of this fiscal year against the full year target of Rs250bn. In the same period of last fiscal year, NDA had witnessed a contraction of Rs11 billion.