KARACHI: The government succeeded to slash its borrowing from the State Bank by half a trillion rupees signalling that a serious effort is there to minimise the budget deficit.

A State Bank report shows that government borrowing from the central bank during the first nine months of this fiscal year fell to Rs303 billion from over Rs800bn a week before.

It looks like an indicator that the government is making efforts to reduce its borrowing load, slashing amount from the Central Bank to keep inflation under control and get a control over enlarging fiscal deficit.

The State Bank in its previous quarterly report had warned that the fiscal deficit could increase up to 6 and 7pc of the GDP. This large fiscal deficit is disturbing for both the government as well as the IMF which has been supporting the government to improve its balance of payments.

Since borrowing from the central bank is inflationary in nature, massive cut in borrowing would help government curtail rising inflation.

The inflation in March increased compared to February which is alarming for economic managers.

However, government substantially increased borrowing from scheduled banks for budgetary support.

The State Bank reported that government borrowing from private banks rose to Rs366bn; still much less than Rs863bn borrowed during the same period last year.

The track record of government borrowing was quite different last year since borrowing from scheduled banks during FY13 was Rs960bn and in FY-12 it was Rs996bn.

Another development which helps economy show some growth was private sector borrowing. The government’s less borrowing from scheduled banks created space for private sector to benefit from the banking money.

The private sector borrowed double than last year from banks which is significant for growth of economy. The World Bank recently stated that economic growth rate could be 4pc this year.

The private sector during the last nine months borrowed Rs302bn compared to Rs141bn in the same period last year.

The State Bank reported that both net domestic assets of the banking system and net foreign assets of the banking have improved.