KARACHI, May 22: The government borrowing for budgetary support has increased to Rs66.4 billion or more than four times the original target of Rs15 billion. The data released by the State Bank shows that the government borrowing between July 1, 2003 and May 8 , 2004 shot up to Rs66.4 billion against the full fiscal year 2003-04 target of Rs15 billion.

During the corresponding period of the last fiscal year, the government had made no borrowing for budgetary support: it had rather retired Rs46 billion in this account.

Sources close to the ministry of finance say the borrowing target of Rs15 billion has been revised upward without disclosing the specific number. The government has so far not made a formal announcement of the upward revision in its targeted borrowing for budgetary support.

The sources say the current borrowing of Rs66.4 billion is far higher than even the revised target, but they do not give the exact figures. Earlier, a press report suggested that the target had been increased to Rs36 billion.

The break-up of the data shows that the central government made a net borrowing of Rs73.7 billion between July 1, 2003 and May 8, 2004, but the provincial governments retired Rs7.3 billion bank borrowing made earlier. Thus on balance, the overall government borrowing for budgetary support stood at Rs66.4 billion during this period.

A key reason for a phenomenal increase in the borrowing is that treasury bill yields have remained very low during this period. The weighted average yield ranged between 1.2 and two per cent on the benchmark six-month T-bills and between 2.15 and 2.20pc on one-year T-bills. The government raised large bank debts at such low rates and used part of the same to retire expensive non-bank debts.

Bankers say what forced the government to exceed the target of bank borrowing was that it failed to raise enough debts through non-banking sources.

That is precisely why the government is now trying to enhance non-bank borrowing so that its borrowing of Rs66.4 billion could be reduced significantly before the end of the current fiscal year.

The government can do this by selling a large amounts of Pakistan Investment Bonds or PIBs to the non-bank sector at the end of this month and in next month.

The government is going to sell Rs15 billion PIBs of three-, five- and 10-year at the end of this month. It will also sell Rs30 billion 15-year and 20-year PIBs on June 9.

Sources at the State Bank say the government may decide to sell even more PIBs in the second half of June.

The central bank is persuading the primary dealers or the banks that sell government securities in the secondary market to find as many non-bank investors for the PIBs as possible.

Bankers say whereas the 15-year and 20-year bonds can easily be sold to insurance companies and pension and provident funds, corporates are not showing much interest in the PIBs of lesser tenures.

Longer tenure PIBs are most suitable for the insurance companies because of their long-term liabilities.