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Last Updated : 2024-04-24 06:20:00
The State sector borrowings soared in March as salaries and bonuses fell due for the country’s bloated public sector while supplier bills needed settlement ahead of New Year holidays.
State sector’s outstanding borrowings from the Central Bank as well as from the licensed commercial banking sector expanded by a whopping Rs.211.4 billion in March, from Rs.35.1 billion in February.
The net credit to the government consisted of Rs.95.7 billion worth of fresh credit provided by the Central Bank, while the Central Bank’s holdings of the treasury bill stock rose by Rs.32.29 billion between February and March end.
This outstanding bill stock rose by another Rs.60.93 billion from March end through April 15 during which time the government took a decision in the eve of the New Year to give a Rs.5, 000 stipend to nearly 3.0 million households, out of 5.1 million total households in the country. Meanwhile, the bulk of the credit or Rs.115.7 billion for the government was raised from the licensed commercial banking sector in March.
The higher the restrictions on the economy, the higher were the need for the government to borrow from banks and the Central Bank. While the former leads to crowding out of the private sector from the benefit of making the most of the low interest rates for their job creating business expansions, the latter will end up paying salaries to the ever bloating public sector.
The practice could ignite inflation as money supply increases with the absence of no meaningful production in the economy because a large swath of people is restricted to their homes.
There is already a spectre of inflation as seen from both the producer and consumer prices in the last couple of months. But the Central Bank thinks these are transitory and will subdue in the months ahead. Meanwhile, the public corporations borrowed a net Rs.18.4 billion from the banking system in March compared to Rs.21.9 billion in February.
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