KARACHI: Net government borrowings surged to Rs361.608 billion from July 2007 to April 26, 2008 which expanded broad money (M2) growth to Rs343.671 billion and continued inflationary pressures on the economy.

Although during the corresponding period of the last fiscal year (July-April 28, 2006-07) government’s net borrowings were very low (Rs120.721 billion), M2 growth was 12.16 per cent to Rs414.415 billion.

According to State Bank of Pakistan’s statistics, the government borrowed Rs484.950 billion from the SBP during the aforesaid period, which pushed broad money growth to 8.45 per cent. However, at the same time, it retired Rs150.079 billion loans of scheduled banks.

From July-April 26, 2007-08 government borrowings for budgetary support ballooned to Rs334.871 billion as compared to Rs170.987 billion in the corresponding period of the last fiscal year. The government borrowed Rs2.459 billion for commodity operations and Rs278 million for other purposes.

It is pertinent to note that the federal government may borrow directly from the SBP either as advances or purchase of market treasury bills. Advance is extended for government borrowings up to Rs100 million at an interest rate of 4pc per annum, whereas higher amounts are borrowed through SBP purchases of six-month MTBs at the weighted average yield determined in the most recent fortnightly auction of the paper.

The provincial governments and Government of Azad Jammu & Kashmir may also borrow directly from SBP through raising their debtor balances (over drafts) within limits defined for them.

In the aforementioned period, credit to the non government sector augmented to Rs413.215 billion against Rs278.002 billion in the corresponding period of the last fiscal year, whereas credit to the Public Sector Enterprises (PSEs) increased to Rs41.730 billion which stood at Rs4.068 billion in the similar point in time of the preceding fiscal year. The SBP credit to Non Banking Financial Institutions recorded Rs214 million compared to Rs373 million of the last year.

According to SBP statistics from July-April 26, 2007-08 the amount in circulation was Rs152.880 billion, contrary to that in July-April 28, 2007-08. During this period the other deposits with SBP reduced by Rs2.718 billion contrary to which, Rs1.168 billion was increased.