KARACHI: The government has increased borrowing targets, both for market treasury bills and Pakistan Investment Bonds for the next three months.

The State Bank reported on Monday that the government would borrow Rs1.275 trillion through the t-bills in next three months. The government usually issues three-month targets in the beginning of each month. In October, the government set Rs1.1tr borrowing target through t-bills for next three months.

The government borrows mostly through t-bills and most of the money is borrowed from scheduled banks. Like t-bills, the government also borrows through Pakistan Investment Bonds. The target for PIBs has also been increased for the next three months. In October, three-month target was fixed at Rs150bn while on Nov 2 (Monday), the target was enhanced to Rs200bn.

If the government keeps on borrowing as per plan, it may exceed the total of the last fiscal year. In the fiscal year 2015, the government borrowed Rs1.413tr while collective borrowing target will reach Rs1.475tr.

Another report of the State Bank showed that the government borrowed Rs498 billion through scheduled banks during the first three-and-a-half months of the current fiscal year which is 35 per cent of the total borrowing of fiscal year 2015.

Reckless borrowing of the government has increased level of domestic borrowing, making it impossible to repay without further borrowing. In case of t-bills, the government will have to pay Rs1,152bn on maturity of the previous borrowing, while it will borrow an additional Rs122bn during the next three months.

In case of PIBs, maturing amount in the next three months will be Rs186.4bn while the government will borrow an additional Rs13.4bn for other consumptions. The domestic borrowing eats up 40pc of the annual revenue collected by the government.

Unlike previous year, the government has yet not borrowed from the State Bank. Instead, it has retired debt worth Rs272bn. No to borrowing from State Bank was an advice of the IMF, but it paid well since inflation has been declining. The borrowing from Central Bank is believed as inflationary.

Published in Dawn, November 3rd, 2015

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