State borrowings from banking sector hit Rs.169bn in August

State borrowings from the Central Bank and commercial banks rose substantially during August, notwithstanding the easing from a month earlier caused due to the billion-dollar bond repayment in July. 

The Central Bank under the new Governor has assured some restraint on liquidity injections to the government to finance the country’s bloated budget deficit to bring stability into the markets. 

According to the data available through August, the government has borrowed Rs.168.7 billion from the Central Bank and licensed commercial banks, bulk of which however came from the former in the form of printed money. 
This is a decline from Rs.318.8 billion borrowed by the government in July, a large part of which or Rs.213.48 billion was caused by the fresh money printed to settle the bond on July 26. 

Out of August credit, Rs.116.4 billion came from the monetary authorities, which predominantly refers to the Central Bank, while another Rs.52.3 billion came from the commercial banking sector. 

This is amid the commercial banks disbursing a mammoth Rs.134 billion in the same month to the private sector bringing the highest such disbursements since 2015. 

Together with the State borrowings, total domestic credit rose by a robust 26.5 percent from a year ago, helping the money supply as measured by the broad money or M2b to grow by an equally robust 21.0 percent in the year to August 2021. 

The outstanding credit to State-owned enterprises declined by Rs.4.0 billion in August 2021. 

By the end of last week, the Central Bank holdings of government securities were at Rs.1, 469.84 billion, unchanged from the preceding week. But during October so far such holdings rose by Rs.137.63 billion as the government injected liquidity to support its finances.