"Less than targeted revenue collection, massive raise in current expenditures and high subsidies are responsible for the substantial budgetary borrowing during the current fiscal year," bankers said.

They said these factors have compelled the federal government to borrow more from scheduled banks as well as from central bank to meet its widening fiscal deficit. Rising borrowing trend from domestic sources reflects that the government is facing serious financial problems and still relying on banking system to meet its high fiscal deficit, they said.

The State Bank of Pakistan (SBP) revealed that borrowing for budgetary support by the federal government has up by 91 percent to reach Rs914.315 billion during July1, 2011 to March 2, 2012 as compared to Rs479.412 billion borrowed during July 1, 2010 to March 5, 2011, depicting an increase of Rs435 billion during the initial eight months.

The net borrowing for budgetary support by federal government included Rs234.870 billion from SBP and Rs 679.445 billion from other scheduled banks.

Although, borrowing from both sources i.e. SBP and scheduled banks, are on rise, however major increase has witnessed in borrowing from scheduled banks, which posted an increase of 145 percent during the period under review.

The federal government has borrowed Rs679.445 billion from scheduled banks during July to March 2, 2012 compared with Rs277.488 billion in the same period of last fiscal year, showing an increase of Rs402 billion.

In addition, the federal government borrowing for budgetary support from SBP surged by 16 percent or Rs 33 billion to Rs 235 billion as on March 2, 2012 as against Rs 202 billion in the same period of last fiscal year 2011. Bankers said high borrowing from scheduled banks as compared to the central bank depicts that government is making some efforts to keep low borrowing from the central bank and get major part of borrowing from scheduled banks by selling more treasury bills. On the other side, provinces during the period has presented strong financial health as they retired their borrowing to SBP.

During the period under review government of Balochistan retired Rs16 billion to the state bank, Khyber Pakhtunkhwa some Rs3.065 billion and government of Sindh repaid back Rs4.958 billion. However, Punjab is the single province, which has borrowed Rs16.511 billion for budgetary support from SBP during July 2011 to March 2012. During the period under review, provinces have also borrowed Rs10.103 billion from scheduled banks.

Cumulatively, federal and provincial governments borrowing for budgetary support has stood at Rs916.812 billion during initial eight months, as against Rs425.897 billion in corresponding period of last fiscal year. Similarly, as per latest statistics, Broad Money (M2) has registered a growth of 6.05 percent during July-March of fiscal year 2012 as compared to 9.36 percent growth in the corresponding period of last fiscal year 2011.

RIZWAN BHATTI