47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Pakistan Economic Survey 2011-122– 11 th May 2012 on account of rising subsidy oncommodities, public sector enterprises' losses andless than target revenue collection. Governmentborrowingfor budgetary support alone stood at Rs1,084.4 billion as compared to Rs. 603.3 billioninthe same period of the last year. TheSBP financinghas increased to Rs. 442.3 billion as comparedtoFigure 5.2: Government BorrowingsRs. 217.7 billion. Financing fromscheduled bankswitnessed a net increase of Rs. 642.1 billion duringthe period under review againstRs. 385.6 billionlast year. Non-bank and external financing forbudgetarysupportwas less than expected,compelling the government to borrow fromtheSBP and scheduled banks.800.00600.00500.0From SBPRs. Billion400.00200.000.00350.0200.0From Scheduled banksTotal borrowings-200.002007‐082008‐09 2009‐10 2010‐11 July‐14Mayy July‐ 11May2011 201250.0The heavyreliance onthe borrowing requirementof the government from the banking system hasalso led to the sluggish growth in the privatesector, under the crowding out effect. Accordingtothe recent SBP Amendment Act, 2012, thegovernment borrowingfrom the SBP is requiredtobe repaidat the endof each quarter and theexisting stock is to be retired withineight years.Commodity FinanceCommodity finance aims to provide short termadvances either to thegovernment, public sectorcorporations or privatesector for the procurementof the commodities such as cotton, wheat, rice,sugar andfertilizer.During July – 11 th May2012, loansfor commodityfinancing registered a net retirement of Rs. 81.6billion against the retirement of Rs. 101.1 billioninthe sameperiod of fiscal year 2010-11. Theretirementt was primarily concentrated in thesecond quarter of fiscal year 2012 as thegovernment released Rs. 78 billion to procurementagencies for the settlement of accumulatedsubsidies. On 11 th May, 2012 the stock ofgovernment borrowings for commodity operationsstood at Rs 315.9 billion (Figure 5.3).Rs BillionFigure 5.3: Commodity Finance450400350300250200150100500The government procurement target is 7.72 milliontons (MT) of wheat this year, andthe supportpricehas been raised toRs. 1050 per 40 kg for theforthcoming wheat crop. Additionally, decline ininternationalwheat prices has reduceddtheincentive for its export by the private sector.Therefore, a considerable rise in the creditrequirement for wheat procurement is expectedduring the rest of the months of current fiscal year2011-12.68