Govt borrows over Rs1 trillion

[WAJsal]

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management. — Khalida Haq/file
KARACHI: Government borrowing from scheduled banks crossed Rs1 trillion in the first eight months of this fiscal year.

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management.

During the same period last year, the government borrowed Rs318bn from scheduled banks for budgetary support. From the State Bank, the government last year borrowed Rs367bn, and during the current fiscal year, it retired Rs434bn of the Central Bank.

Despite this changed strategy of borrowing from scheduled banks instead of the SBP, the volume speaks a lot about the fiscal management. The rising domestic debts are increasing the size of debt-servicing which is already the largest spending head of budget.

The rising debt-servicing clearly indicates that the government failed to bring required structural fiscal reforms to generate revenue.

Experts have been warning the government to bring reforms and set a limit of borrowing from scheduled banks, but there was no response from the government side.

In FY14, bank borrowing stood at Rs170bn while in FY13 it was Rs960bn but the amount never crossed Rs1tr in a fiscal year.

The government expects higher economic growth of over 5 per cent this year, but revenue generation and fiscal imbalances indicate that the economy was not growing as per targets set in the budget.

Rapid growth in bank borrowings had started from the very first month of the current fiscal year. In July, interest payments on domestic debt showed an annualised growth rate of 80.5pc. The amount of interest alone rose to Rs188bn compared to Rs104bn in July of FY14.

The government kept on selling the high-yield Pakistan Investment Bonds which further complicated the situation and liabilities started mounting. So far, the government has sold Rs3.888tr PIBs till end of January 2015.

According to another report of the SBP, debt servicing as per cent of GDP in FY14 was 4.1pc and 40.7pc of tax revenue. The report said the debt-servicing was 27.5pc of the current expenditure in FY14 while it was 24.7pc in FY13.

The debt stocks as percentage of the GDP rose to 42.9pc in FY14 from 42.3pc. It sharply rose from 31.3pc of the GDP in FY10.

The rapid increase in the domestic debt will further inflate stocks of domestic debt, including the PIBs and would escalate the debt-to-GDP ratio.

Published in Dawn, March 13th, 2015
No clear strategy from out government.
@syedali73 ,@DESERT FIGHTER ,@BetterPakistan ,@Pomegranate ,@Menace2Society ,@Color_Less_Sky ,@Green Arrow ,@Imran Khan ,@Zarvan ,@Akheilos ,@faisal6309 ,@Leader ,@war khan ,@Leader ,@AZADPAKISTAN2009 ,@nomi007 ,@Dr. Stranglove @Jazzbot ......Your thoughts.

 

[Menace2Society]

You have to speculate to accumulate.

I have no issues with borrowing but how the money is used.

 

[WAJsal]

You have to speculate to accumulate.

I have no issues with borrowing but how the money is used.

Who and How are we going to pay back these loans. Government seems to be taking a nap.

 

[Ahsan Butt]

This is insane. Is it wise to put a country in debt when it's going through such a political turmoil? I don't think so.

 

[East or West India Best]

The night is darkest before the dawn.

 

[Menace2Society]

Who and How are we going to pay back these loans. Government seems to be taking a nap.

You have to leverage your credit for maximum profit. Doesn't matter how much you owe as long as you are in profit.

 

[I.R.A]

If government is going to provide subsidies on new projects like metro (If I am not mistaken), and won't go for revenue generation opportunities first, then what else source is there for funds generation?

It would have been lot better to go for revenue generation first and development projects in accordance with their critical ranking latter. But any how I am just someone who lives in Pakistan. Geniuses are either buying political support to run government affairs or arranging Sit-ins

You have to leverage your credit for maximum profit. Doesn't matter how much you owe as long as you are in profit.

The borrowing is for spending not for investing.............. if you don't invest in feasible profit making projects how will you earn profit?

 

[Imran Khan]

ary yaar apny banks hain deen gay to theek warna maaf kara deen gay tension na lo

 

[Dr. Strangelove]

The borrowing is for spending not for investing.............. if you don't invest in feasible profit making projects how will you earn profit?

dont waste your breath
they are gonna build more metros and subsidize them loss loss and only loss
though itwfaq founderies will make a lot of profit

 

[Amaa'n]

but Pakistan's economy has improved, says IMF - The Express Tribune

 

[AbeeraKhan12]

How many zeroes in Trillion

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management. — Khalida Haq/file
KARACHI: Government borrowing from scheduled banks crossed Rs1 trillion in the first eight months of this fiscal year.

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management.

During the same period last year, the government borrowed Rs318bn from scheduled banks for budgetary support. From the State Bank, the government last year borrowed Rs367bn, and during the current fiscal year, it retired Rs434bn of the Central Bank.

Despite this changed strategy of borrowing from scheduled banks instead of the SBP, the volume speaks a lot about the fiscal management. The rising domestic debts are increasing the size of debt-servicing which is already the largest spending head of budget.

The rising debt-servicing clearly indicates that the government failed to bring required structural fiscal reforms to generate revenue.

Experts have been warning the government to bring reforms and set a limit of borrowing from scheduled banks, but there was no response from the government side.

In FY14, bank borrowing stood at Rs170bn while in FY13 it was Rs960bn but the amount never crossed Rs1tr in a fiscal year.

The government expects higher economic growth of over 5 per cent this year, but revenue generation and fiscal imbalances indicate that the economy was not growing as per targets set in the budget.

Rapid growth in bank borrowings had started from the very first month of the current fiscal year. In July, interest payments on domestic debt showed an annualised growth rate of 80.5pc. The amount of interest alone rose to Rs188bn compared to Rs104bn in July of FY14.

The government kept on selling the high-yield Pakistan Investment Bonds which further complicated the situation and liabilities started mounting. So far, the government has sold Rs3.888tr PIBs till end of January 2015.

According to another report of the SBP, debt servicing as per cent of GDP in FY14 was 4.1pc and 40.7pc of tax revenue. The report said the debt-servicing was 27.5pc of the current expenditure in FY14 while it was 24.7pc in FY13.

The debt stocks as percentage of the GDP rose to 42.9pc in FY14 from 42.3pc. It sharply rose from 31.3pc of the GDP in FY10.

The rapid increase in the domestic debt will further inflate stocks of domestic debt, including the PIBs and would escalate the debt-to-GDP ratio.

Published in Dawn, March 13th, 2015
No clear strategy from out government.
@syedali73 ,@DESERT FIGHTER ,@BetterPakistan ,@Pomegranate ,@Menace2Society ,@Color_Less_Sky ,@Green Arrow ,@Imran Khan ,@Zarvan ,@Akheilos ,@faisal6309 ,@Leader ,@war khan ,@Leader ,@AZADPAKISTAN2009 ,@nomi007 ,@Dr. Stranglove @Jazzbot ......Your thoughts.

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management. — Khalida Haq/file
KARACHI: Government borrowing from scheduled banks crossed Rs1 trillion in the first eight months of this fiscal year.

According to State Bank’s latest report, the government borrowed Rs1.029tr during July-February 2014-15 from banks, reflecting poor health of the fiscal management.

During the same period last year, the government borrowed Rs318bn from scheduled banks for budgetary support. From the State Bank, the government last year borrowed Rs367bn, and during the current fiscal year, it retired Rs434bn of the Central Bank.

Despite this changed strategy of borrowing from scheduled banks instead of the SBP, the volume speaks a lot about the fiscal management. The rising domestic debts are increasing the size of debt-servicing which is already the largest spending head of budget.

The rising debt-servicing clearly indicates that the government failed to bring required structural fiscal reforms to generate revenue.

Experts have been warning the government to bring reforms and set a limit of borrowing from scheduled banks, but there was no response from the government side.

In FY14, bank borrowing stood at Rs170bn while in FY13 it was Rs960bn but the amount never crossed Rs1tr in a fiscal year.

The government expects higher economic growth of over 5 per cent this year, but revenue generation and fiscal imbalances indicate that the economy was not growing as per targets set in the budget.

Rapid growth in bank borrowings had started from the very first month of the current fiscal year. In July, interest payments on domestic debt showed an annualised growth rate of 80.5pc. The amount of interest alone rose to Rs188bn compared to Rs104bn in July of FY14.

The government kept on selling the high-yield Pakistan Investment Bonds which further complicated the situation and liabilities started mounting. So far, the government has sold Rs3.888tr PIBs till end of January 2015.

According to another report of the SBP, debt servicing as per cent of GDP in FY14 was 4.1pc and 40.7pc of tax revenue. The report said the debt-servicing was 27.5pc of the current expenditure in FY14 while it was 24.7pc in FY13.

The debt stocks as percentage of the GDP rose to 42.9pc in FY14 from 42.3pc. It sharply rose from 31.3pc of the GDP in FY10.

The rapid increase in the domestic debt will further inflate stocks of domestic debt, including the PIBs and would escalate the debt-to-GDP ratio.

Published in Dawn, March 13th, 2015
No clear strategy from out government.
@syedali73 ,@DESERT FIGHTER ,@BetterPakistan ,@Pomegranate ,@Menace2Society ,@Color_Less_Sky ,@Green Arrow ,@Imran Khan ,@Zarvan ,@Akheilos ,@faisal6309 ,@Leader ,@war khan ,@Leader ,@AZADPAKISTAN2009 ,@nomi007 ,@Dr. Stranglove @Jazzbot ......Your thoughts.

 

[SBD-3]

The government kept on selling the high-yield Pakistan Investment Bonds which further complicated the situation and liabilities started mounting. So far, the government has sold Rs3.888tr PIBs till end of January 2015.

The banks have been accumulating PIBs amid falling interest rate scenarios. The high demand of PIBs is helping government to sell them cheaper to Banks. For example, till last auction and nov2014 the Yield on PIBs have fallen ~4% vis a vis only 2% on short duration MTBs. To maintain a healthy spread, Banks started accumulating PIBs and are likely to do so for time ahead til monetary loosening isnt bottomed.
There is a visible difference between govt's demand for debt and private sector's appetite for debt.This could be observed in previous regime where the interest rate on government securities was increasing, thus attracting bank borrowing. Now its the other way around, bank's appetite for long term papers amid falling interest rates is helping government to raise long term funds. However, the downside is that banks are still now willing to lend to private businesses-an indication of high business risk in the country-

 

[BetterPakistan]

@WishLivePak now say SBP is lying

 

[I.R.A]

dont waste your breath
they are gonna build more metros and subsidize them loss loss and only loss
though itwfaq founderies will make a lot of profit

Aik he to forum mila hai apni bak bak karny ka to faida utha raa ho, warna normal life may log kahan bardasht kary gy myri yeh sab paglo wali batain

The government kept on selling the high-yield Pakistan Investment Bonds which further complicated the situation and liabilities started mounting. So far, the government has sold Rs3.888tr PIBs till end of January 2015.

The banks have been accumulating PIBs amid falling interest rate scenarios. The high demand of PIBs is helping government to sell them cheaper to Banks. For example, till last auction and nov2014 the Yield on PIBs have fallen ~4% vis a vis only 2% on short duration MTBs. To maintain a healthy spread, Banks started accumulating PIBs and are likely to do so for time ahead til monetary loosening isnt bottomed.
There is a visible difference between govt's demand for debt and private sector's appetite for debt.This could be observed in previous regime where the interest rate on government securities was increasing, thus attracting bank borrowing. Now its the other way around, bank's appetite for long term papers amid falling interest rates is helping government to raise long term funds. However, the downside is that banks are still now willing to lend to private businesses-an indication of high business risk in the country-

The bold part and your opening sentence is confusing me, high yield / falling interest rates? And high demand to sell cheaper means............. borrowing on lower interest rate? Sorry if I am making no sense but would love to understand this.

 

[Pomegranate]

i wonder what they have done to the money ............i can only pray that our money is in safe hands