KARACHI: The government will borrow Rs3.75 trillion from the banking system in August-October, the State Bank of Pakistan (SBP) reported on Wednesday.
The government plan that it will borrow Rs3.45tr through market treasury bills (MTBs) and Rs300 billion through Pakistan Investment Bonds (PIBs) in the three-month period.
The government, which depends largely on domestic and foreign borrowing, will raise Rs304.6bn in addition to the maturing amount of about Rs3.39tr during this period.
The government has been borrowing heavily from the banking system for the last four years. This has put enormous pressure on banks’ liquidity.
The government changed its strategy in 2016-17 and started borrowing from the central bank, leaving the liquidity of scheduled banks for the private sector. Resultantly, the private sector borrowed Rs748bn from banks.
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However, the growing need for revenue in the final year of the government can turn its attention towards scheduled banks again.
The government depends on indirect taxes and borrowing from the banking system as it failed to increase direct taxes or improve the tax-to-GDP ratio.
The government is going to need heavy funds to finish important projects in the election year. Despite heavy borrowing from the central bank in 2016-17, the government borrowed Rs361bn from scheduled banks.
However, it was still less than Rs1.36tr borrowed in 2015-16.
Inflation Impact
Although inflation was relatively low in July, the market expects the consumer price index to go up in coming months.
 reported on Wednesday.){kind=link}