Government bank borrowing continued in the first half of FY2013.
The government did acknowledge requirements under the State Bank of
Pakistan Act by retiring PRs399 billion of the PRs505 billion borr...
owed from the central bank during the first quarter of FY2013, before borrowing back PRs183 billion in the second quarter in response to
fiscal pressures, thereby breaching the act once again. Large government
borrowing from commercial banks requires ever-larger injections from
the central bank on a weekly basis to meet banks’ liquidity requirements and keep money market rates anchored within central bank policy rates (Figure 3.20.14). Taming inflation would require shrinking these
injections, which would require in turn lower government borrowing or else higher lending rates to further crowd out credit to the private sector.
Source: State Bank of Pakistan. 2013.
Statistical Bulletin. January - http://www.sbp.org.pk/ecodata/index2.asp
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