Punjab's borrowings increase by Rs7b

KARACHI - Punjab governments budgetary borrowings by the domestic financial system rose by Rs7 billion during July-13th February FY10.
The government of Punjab borrowed Rs27 billion from the SBP and scheduled banks during the reported months of FY10, compared with Rs20 billion in the same period last year.
The central and commercial banks disbursed this credit to the different departments of the provincial government for budgetary support, commodity operations and to finance its development spending during the period under review.
The Sindh government borrowing also increased to Rs123m during Jul-Feb FY10.
The sharp expansion witnessed by the said province in the budget related borrowings, has not only reflected its weak fiscal position but, indicated an exceptional surge in the total public spending faced by the government in the both segments of current and development expenditures during the reported days of the prevailing financial year. As a result, the Punjab government had entailed heavy borrowings form the banking institutions to meet its spending.
The revenue balance of the Punjab government has been facing some deterioration for the last two years. The weaker growth in revenue receipts, including tax and non-tax being complicated the fiscal management of the province.
It is pertinent to mention here that the whole operating and public expenses of the provincial government is being carried out by the overdraft facility provided by the financial institutions to the said government to fulfil its budgetary obligation. It may be mentioned here that the term overdraft can be defined as it is a limit up to which an account holder may borrow from a bank when there are no funds in his or her checking account. Keeping in view that the question arises how the provincial government could retire its budgetary debt with SBP and scheduled banks in the days to come.
The share of commercial banks in overall budget financing to the provincial governments, seem to be high as compared to the central bank because of a certain limit imposed on the SBP under Stand-by Arrangement Programme with IMF on government borrowing.
The central governments total borrowings form the domestic banking sources for budgetary expenditures remained lower during Jul-Feb 13th FY10 as declined by Rs237 billion but it is believed to be intact from commercial banks.
However, provincial government borrowings increased by Rs18.486 billion during the same period.
From July 01 to February 13, 2010 total government sector borrowings stood at Rs85 billion as against Rs300 billion in the equivalent period of FY09. The central government borrowed Rs65 billion from the domestic financing sources, compared with Rs307 billion during Jul-Feb 2009. However, the borrowings from the provincial government sharply increased to Rs20b from Rs1.514 billion last year.
The SBP break-up on monetary aggregates for the period ended on February 13, 2010 revealed that the provincial governments of Balochistan and NWFP witnessed a significant decline their stock of borrowings, which stood at Rs6.260 and Rs1.148 billions during the period under discussion.
The AJK government budgetary borrowing surged to Rs1.497 billion, compared with Rs6.759 billion negative during FY09. According to SBP, Reserve Money (RM) held by the central bank reported a strong expansion in stock and growth during Jul-Feb FY10, which soared to Rs176 billion, depicting 11.65 per cent growth.
Net Foreign Assets (NFA) of the banking system amounted to Rs44 billion in Jul-Feb FY10 while Net Domestic Assets (NDA) stood negative at Rs291 billion negative during the same period of ongoing fiscal year while the Net Domestic Assets fell to Rs133 billion, compared with Rs287 billion last year due to contraction in domestic demand for private sector credit, low budgetary borrowing and sluggish credit off-take under commodity finance that limited the net expansion in NDA during the period under analysis.