KARACHI: The government’s borrowing for budgetary support surged 108 per cent to Rs104 billion during the first five months of the current fiscal year to bridge the widening fiscal gap, showed data released by the State Bank of Pakistan.

Since the spending remains at lower side during first half of the current fiscal year, the budgetary borrowing does not reflect the actual growing need for liquidity.

The government borrowed Rs50bn in the same period of last fiscal year but the fiscal deficit remained high at 7.5pc of GDP or Rs3.41 trillion at the end of FY21.

The fiscal deficit for FY22 has been projected at 6.8pc of GDP but the macro indicators suggest it could be much higher than the target. In the budget FY22, the fiscal deficit was projected at Rs3.99 trillion. The sources of financing were Rs1,246bn from net external financing, Rs2,492bn from net domestic financing and Rs252 as privatisation proceeds.

The government has accumulated most of the liquidity from the domestic sources like treasury bills and Pakistan investment bonds while the net outflow from National Savings Schemes (NSS) reduced the chance to borrow any higher amount.

For the last two years the NSS showing net outflow due to absence of institutional investments.

The government has banned institutional investments in NSS to keep the financial market liquid for advances to private sector.

So far the central government borrowed Rs1,580bn during FY22 as the total debt reached Rs40.279tr in October compared to end of June.

Published in Dawn, December 10th, 2021