ahlam1399
09-01-2016, 04:13 AM
State Bank of Pakistan warns continued govt borrowing
from banking sector will be harmful
ISLAMABAD: The government domestic debt and liabilities have e**rmously increased by 80 per cent during the last three fiscal years and reached Rs 14.02 trillion in June 2016 from Rs 11.17 trillion in June 2014.
The State Bank of Pakistan has warned that the continued government borrowing from the banking sector would be harmful being more inflationary and too many expectations from the fiscal stimulus would be an error. The official data of the State Bank of Pakistan, a copy of which is available with The News, reveal that in June 2014, the domestic debt of the government of Pakistan was Rs 10,906.5 billion including Rs 3,999.1 billion permanent debt, Rs 4,599.1 billion floating debt, Rs 2,303.8 billion unfunded debt and Rs 4.5 billion foreign currency loans. However, in June 2016, it increased by 80.06 per cent and reached Rs 13,623.2 billion including Rs 5,935.6 billion permanent debt, Rs 5001.7 billion floating debt with 91.95 percent increase from 2014, Rs 2680.9 per cent unfunded debt with 85.93 per cent increase from June 2016 and Rs 4.7 billion foreign currency loan.
Similarly, the government domestic liabilities reached Rs 397.2 billion in June 2016 from Rs 270 billion in June 2014. Hence both the debt and liabilities of the government reached Rs 14,020.4 billion in June 2016 from Rs 11,176.5 in June 2014.
The SBP working paper on domestic borrowing titled “The Dominant Borrower Syndrome: The Case of Pakistan” released in August 2016 has warned that the government borrowing from the central bank would be harmful being more inflationary.
The study says, “We extend the Melina and Villa (2014) model by allowing the government to compete with private borrowers (firms) for bank credit in a mo**polistically competitive banking industry. The model confirms when a government has ** recourse to other sources to raise finance but to borrow from banks, the interest rate rises and the private sector investment is crowded out.”
According to this study, the continued government borrowing from the banking sector in Pakistan has led to its own possible malaise witnessed by widening interest rates and lower private sector credit despite the fact that over the last four years, the policy rate has been reduced from 10.5pc to 6.0pc.
“Our findings suggest that too many expectations from the fiscal stimulus would be an error in emerging eco**mies with limited resources and a developing financial infrastructure. As an alternative, we also show that an increase in the consumption tax rate would be a better policy choice to finance the expansion in government spending, especially during recessionary periods,” says the report.
According to the SBP working paper, the government needs to increase the consumption tax rate as it would be a better option to finance the government spending.
“As an alternative policy choice to resorting to dominant-borrower syndrome, our impulse response functions (IRF) also show that the increase in the consumption tax rate would be a better option to finance the expansion in government spending, especially during recessionary periods. The main caveats of the paper are that it ig**res the external sector an important feature for the small open emerging eco**my. The inclusion of external sector will **t change the main impact discussed here, unless the government replaces the dominant-borrower syndrome with external finances. Second, the model does **t feature price discrimination between the two types of agents: the government and the private sector,” the report says.
http://feeds.feedburner.com/~r/com/YEor/~4/sGNQ2fWSzBE
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from banking sector will be harmful
ISLAMABAD: The government domestic debt and liabilities have e**rmously increased by 80 per cent during the last three fiscal years and reached Rs 14.02 trillion in June 2016 from Rs 11.17 trillion in June 2014.
The State Bank of Pakistan has warned that the continued government borrowing from the banking sector would be harmful being more inflationary and too many expectations from the fiscal stimulus would be an error. The official data of the State Bank of Pakistan, a copy of which is available with The News, reveal that in June 2014, the domestic debt of the government of Pakistan was Rs 10,906.5 billion including Rs 3,999.1 billion permanent debt, Rs 4,599.1 billion floating debt, Rs 2,303.8 billion unfunded debt and Rs 4.5 billion foreign currency loans. However, in June 2016, it increased by 80.06 per cent and reached Rs 13,623.2 billion including Rs 5,935.6 billion permanent debt, Rs 5001.7 billion floating debt with 91.95 percent increase from 2014, Rs 2680.9 per cent unfunded debt with 85.93 per cent increase from June 2016 and Rs 4.7 billion foreign currency loan.
Similarly, the government domestic liabilities reached Rs 397.2 billion in June 2016 from Rs 270 billion in June 2014. Hence both the debt and liabilities of the government reached Rs 14,020.4 billion in June 2016 from Rs 11,176.5 in June 2014.
The SBP working paper on domestic borrowing titled “The Dominant Borrower Syndrome: The Case of Pakistan” released in August 2016 has warned that the government borrowing from the central bank would be harmful being more inflationary.
The study says, “We extend the Melina and Villa (2014) model by allowing the government to compete with private borrowers (firms) for bank credit in a mo**polistically competitive banking industry. The model confirms when a government has ** recourse to other sources to raise finance but to borrow from banks, the interest rate rises and the private sector investment is crowded out.”
According to this study, the continued government borrowing from the banking sector in Pakistan has led to its own possible malaise witnessed by widening interest rates and lower private sector credit despite the fact that over the last four years, the policy rate has been reduced from 10.5pc to 6.0pc.
“Our findings suggest that too many expectations from the fiscal stimulus would be an error in emerging eco**mies with limited resources and a developing financial infrastructure. As an alternative, we also show that an increase in the consumption tax rate would be a better policy choice to finance the expansion in government spending, especially during recessionary periods,” says the report.
According to the SBP working paper, the government needs to increase the consumption tax rate as it would be a better option to finance the government spending.
“As an alternative policy choice to resorting to dominant-borrower syndrome, our impulse response functions (IRF) also show that the increase in the consumption tax rate would be a better option to finance the expansion in government spending, especially during recessionary periods. The main caveats of the paper are that it ig**res the external sector an important feature for the small open emerging eco**my. The inclusion of external sector will **t change the main impact discussed here, unless the government replaces the dominant-borrower syndrome with external finances. Second, the model does **t feature price discrimination between the two types of agents: the government and the private sector,” the report says.
http://feeds.feedburner.com/~r/com/YEor/~4/sGNQ2fWSzBE
أكثر... (http://feedproxy.google.com/~r/com/YEor/~3/sGNQ2fWSzBE/146888-Domestic-debt-liabilities-up-by-80pc-in-three-years)