The government sector borrowing increased to Rs. 1,586.8 billion for budgetary support during the period July 1st -29 April FY22 as compared to Rs. 642.6 billion during the same period last year, showing an increase of 146 percent year-on-year, according to the Pakistan Economic Survey 2021-21
Domestic borrowing for budgetary support remained higher than last year due to pressure on the external front for high payments. Within budgetary support, the government has borrowed Rs. 133.5 billion from the State Bank of Pakistan (SBP) as compared to the retirement of Rs. 1,164.3 billion in the same period last year.
On the other hand, the government has borrowed Rs. 1,453.3 billion from scheduled banks as compared to its borrowing of Rs. 1,807 billion last year. Resultantly, net government sector borrowing stood at Rs. 1,795.6 billion against the borrowing of Rs. 619.7 billion during the same period last year.
The government-financed around 62 percent of the fiscal deficit from domestic sources during the first nine months of FY22. Within domestic sources, the bank and non-bank financing shares remained at 66 and 34 percent respectively.
Commodity operation means advances provided either to government, public sector corporations, or the private sector for the procurement of commodities such as cotton, rice, wheat, sugar, fertilizer, etc. The federal and provincial governments borrow from scheduled banks to finance their purchase of commodities.
The proceeds from the sale of such commodities are subsequently used to retire commodity borrowing. During FY21, commodity finance observed net borrowing of Rs. 90.6 billion (posted growth of 11.1 percent) against a borrowing of Rs. 57 billion (growth of 7.5 percent) in FY20.
The outstanding stock of commodity finance amounted to Rs. 904 billion in FY21 as compared to Rs. 813.4 billion in FY20. The amount that has been borrowed for commodity finance during FY21 mainly reflected the borrowing of Rs. 90.9 billion by wheat procurement agencies from the banking system as compared to Rs. 43.1 billion in FY20.
Commodities Operations
Loans for commodity finance observed a net borrowing of Rs. 210.9 billion during 1 July-29 April, FY22 as compared to net retirement of Rs. 28.8 billion during the same period last year. The outstanding stock of commodity finance reached Rs. 1,115 billion on 29 April FY22 against Rs. 785 billion during the same period last year.
Loans for wheat financing during July-March FY22 observed a net retirement of Rs. 45.6 billion against the retirement of Rs. 110.8 billion during the same period last year. Loans for sugar financing had net retirement of Rs. 8.6 billion during the period under review before borrowing of Rs. 1.1 billion last year.
Fertilizer financing observed net retirement of Rs. 5.1 billion as compared to net retirement of Rs. 2.9 billion last year. The fertilizer sector has paid its loans due to a better liquidity situation on account of an increase in sales revenues.
Cotton financing witnessed net borrowing of Rs. 82 million as compared to net borrowing of Rs. 94 million last year, and rice financing shows net retirement of Rs. 15 million against net borrowing of Rs. 8.0 million last year.
