KARACHI: The government borrowed Rs751 billion from the State Bank of Pakistan (SBP) in the first 22 days, ie from July 1 to July 22, of the current fiscal year.
\nThe trend shows an apparent shift in the government\u2019s borrowing strategy as it had been only borrowing from banks and the corporate sector for the past two years to meet its fiscal gap.
\nIn fact, the government retired SBP\u2019s debt in the previous two fiscal years which forced it to borrow from scheduled banks. The government retired Rs368bn in FY16 and Rs462bn in FY15.
\nAnalysts have previously indicated that the government could tend to borrow from the central bank in the current fiscal year since it has completed the agreement with the International Monetary Fund (IMF). Under the Fund\u2019s programme, the government was barred from SBP borrowing.
\nInflation at four-decade low is another reason behind government\u2019s borrowing from the State Bank. Continued borrowing through the central bank leads to a rise in inflation, but the present low inflation has enough capacity to absorb the inflationary pressures.
\nGovernment borrowing from the commercial banks reached new heights in the last two years \u2014 it borrowed Rs1.364 trillion in FY16 and Rs1.413tr in FY15.
\nThis huge government borrowing crowded the private sector out. In the preceding fiscal year, private sector\u2019s credit off-take accounted for just 33 per cent of the government borrowing.
\nThe latest report of the State Bank showed that the government has now started retiring debt of commercial banks which reached Rs508bn. This was against the previous year\u2019s trend when the government borrowed Rs72bn from commercial banks from July 1 to July 22.
\nThough the government has changed its borrowing pattern, the State Bank remained cautious and kept the interest rate unchanged at 5.75pc in its latest monetary policy announced on July 30.
\nThe monetary policy showed concerns that inflation could rise during the current fiscal year as the State Bank is expecting inflation to remain in the range of 4.5pc to 5.5pc. A rise in Consumer Price Index inflation to 4.1pc in July from 3.2pc in June proved the State Bank\u2019s fears were right.
\nInflation may go up further if the government continues to borrow from the central bank.<\/p>\n","protected":false},"excerpt":{"rendered":"
KARACHI: The government borrowed Rs751 billion from the State Bank of Pakistan (SBP) in the first 22 days, ie from July 1 to July 22, of the current fiscal year. The trend shows an apparent shift in the government\u2019s borrowing strategy as it had been only borrowing from banks and the corporate sector for the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-619","post","type-post","status-publish","format-standard","category-business"],"yoast_head":"\n