KARACHI, June 27: The present government in its first 100 days has borrowed much more than what the previous government borrowed from the State Bank in first eight months of the ongoing fiscal year completely ignoring the frequent warnings issued by the central bank which termed it as catalyst for inflation.

The SBP calculations showed that the total government borrowing from July 1, 2007 to June 14, 2008 was over Rs651 billion.

Surprisingly, since the formation of new cabinet on March 31, 2008 the government geared up its pace of borrowing sharply. It borrowed Rs355 billion during three and half months while the previous and interim governments collectively borrowed Rs296 billion till March 1, 2008.

The continued rising trend of borrowing reflected that the PPP-led government denying the impression that it would adopt different measures to meet the budgetary deficit.

The SBP had been issuing warnings that record government borrowings for budgetary support would further escalate inflation. The central bank held the government responsible for destroying all its effort to control the inflation.

The new government has already announced that it will reduce borrowing burden from the State Bank but it looks that its plan would be implemented from next fiscal 2008-09.

However, analysts said the rampant borrowing would seriously inflict the economy as its adverse impact would continue to hurt it even in next fiscal year if the government stops borrowing from the SBP.

The government has planned to launch securities papers to mobilise deposits from the public and reduce burden on the SBP.

The rate of return on National Savings Scheme has also been increased by two percentage points to muster maximum deposits from the public.

Analysts believe that despite these efforts the government would require more money to meet the ambitious spending plan.

“The slowdown in economic growth will not create much revenue for the government to meet its spending target and it will have to again rely on SBP borrowing,” said research head of a brokerage house.

A total budget outlay of Rs2,010 billion was announced for 2008-09 and revenue collection target was projected at Rs1,250 billion.

On the expenditure side, a record amount of Rs550 billion, 27 per cent of total expenditure, has been allocated for development expenditure.

“The revenue target is highly ambitious and unlikely to be achieved which means more borrowing to meet the expenditure,” said the analyst.

Moreover, in view of the prevalent oil prices, the government has allocated oil subsidy of Rs140bn as against Rs15bn last year.

The government has already set main inflation target at 12 per cent for the next fiscal year. The record borrowing from the State Bank pushed inflation to 11.5 per cent during the current fiscal year.