KARACHI: The outgoing government raised Rs289 billion through the National Savings Schemes (NSS) during the first eight months of this fiscal year, which was more than what it generated in the entire 2011-12.

The former government used all options to raise liquidity to keep alive its financial affairs, giving boost to the fiscal deficit, the most dangerous sign for an economy, the State Bank noted.

The SBP reported that during the July-February period of 2012-13 the savings schemes attracted a staggering sum of Rs289bn compared to Rs188bn raised in 2011-12.

Economists fear that the fiscal deficit for the current fiscal year could be more than 8 per cent of GDP which ‘will be a serious problem for the next government’.

The fiscal deficit in 2011-12 soared above 8pc inviting serious criticism of economic circles as well as the International Monetary Fund (IMF) which wants the fiscal deficit to be no more than 4pc of GDP.

The government has already borrowed Rs911bn for the budgetary support during the last eight and half month. For the entire FY-12, the government had borrowed Rs1200bn as budgetary support.

The caretaker government has announced to borrow Rs1.3 trillion during the fourth quarter of the current fiscal through treasury bills. This huge amount reflects the government’s increasing reliance on borrowed money.

It is also interesting to note that the tax collection revenue and borrowed amount is running close to each other giving a grim picture of the economy sinking under massive borrowings.

The caretaker government has reportedly asked the finance ministry not to negotiate with the IMF for loans that may create threat for the government struggling to avoid default like situation.

The previous government failed to muster foreign support for its budgetary gaps that also increased the fiscal deficit for the last two years.

The outgoing government did not leave any plan for the finance ministry to carry on its job with a clear vision; instead the borrowing remained only strategy to move ahead.

This rising borrowing would certainly force the State Bank to tighten its monetary policy since inflation could move up. The prevailing single digit inflation is not sustainable for longer periods as the huge liquidity chasing the main inflation to send it up again.

The debt liability has increased so high that the government may not to able to return the entire debt and would prefer to rollover the domestic debts. Most of the domestic debts were accumulated at much higher rates than the prevailing rate. The policy interest for the first time came down to single digit this fiscal while it remained as high as 14 per cent during the last five years.