KARACHI, Sept 26: The government raised Rs37.5 billion through auction of Pakistan Investment Bonds on Wednesday that would simply increase the debt volume which has already crossed Rs4.2 trillion.

Overburdened with accumulating debts, the government did not stop borrowing instead it has accelerated the pace.

The State Bank revealed recently that banks and non-banks holding of government papers has reached Rs4.2 trillion. The amount is twice of the annual revenue collection of the government.

The high growth of debts has been attracting warnings from economists and analysts who said the crisis erupted in the European Union were mainly due to debt-ridden governments.They said the large debts in Greek and Spain has jeopardised the economy of entire European Union. “Pakistan must take care of its rising debt burden that eats up an amount higher than allocated development budgets,” said Aamir Aziz, a businessman who fears that the country was heading towards debt trap like Greek or Spain.

The government has been using all resources to gather cash to carry on its day-to-day spending. The government has set Rs90 billion as target for selling the PIBs in the first quarter (July-Sept).

The auction results on Wednesday showed that highest amount of Rs15 billion were realised for 5 years while Rs13.5 billion for three years. The benchmark 10-year PIBs were sold for an amount of Rs8.9 billion. The amount offered by the financial institutions was Rs86.4 billion.

According to the State Bank report the outstanding amount of PIBs reached Rs1.044 trillion till August 31, 2012. Treasury bills’ amount rose to Rs2.7 trillion while that of Sukuk Bond reached Rs383.5 billion. Despite selling of security papers, the government has been trying to fetch loans from international donors but due to poor economic management, the donors are reluctant to offer monetary help.

The country has not been maintaining fiscal discipline and the fiscal deficit is higher than 7 per cent that attracts serious concern from international donor bodies who are not ready to allow more than 4 per cent fiscal deficit.

For the last three years, the government failed to keep its fiscal deficits in limit while the poor economic growth could not generate enough revenue to reduce the government’s dependence on borrowing.