KARACHI, Dec 15: The government has started reducing its net borrowing for budgetary support to keep it at the IMF-prescribed level of minus Rs54 billion at end-June.

Senior bankers said that net government borrowing declined to Rs8.9 billion on November 24 from Rs36.1 billion on October 27.

“The huge fall of Rs27.2 billion within just four weeks shows the government is trying hard to meet its borrowing target,” said a source close to the ministry of finance. Under the three-year poverty reduction and growth facility, the combined borrowing of the federal and provincial governments is projected at minus Rs54 billion for the current fiscal year.

Bankers said the federal government reduced its borrowing from about Rs23.8 billion as on October 27 to only Rs417 million on November 24; the borrowing by the provincial governments declined from Rs12.3 billion to Rs8.5 billion.

Bankers said the reduction in the government borrowing helped banks offer more credit to the private sector. The private sector received higher amount of gross credit though its net borrowing remained negative amid speedy retirements.

Net private sector credit stood around minus Rs2.4 billion on November 24. On October 27 it was at minus Rs14.7 billion. This means that the private sector got Rs12.3 billion bank credit within four weeks. Senior bankers say net credit flow towards the private sector must have turned positive by now. The figures for the government borrowing after November 24 would be out sometime after Eid.

The three-year performance criteria attached with the PRGF has projected the private sector credit at Rs98.1 billion for the current fiscal year. But most bankers say meeting this target is next to impossible. “Private sector credit would keep expanding in December and between January-March next year,” said treasurer of a state-run bank. “From April, onwards retirement would start.”

So it is unlikely that the private sector credit would rise from minus Rs2.4 billion as on November 24 to Rs98.1 billion by end-June.

Central bankers say since the private sector credit has so far not risen at the projected rate it indicates that the economy is not picking up with the desired speed. They say achieving the IMF-projected growth of 3.7 per cent seems out of question. The SBP has said in first quarterly report that Pakistan’s GDP may grow by 2.5-3.75 per cent this fiscal year. But senior central bankers say privately that the growth would be on the lower side of this estimate.