Monetary expansion surges 4.5pc

KARACHI: Monetary expansion rose to 4.5 per cent during the first eight and a half months of the fiscal year, compared to just 0.5pc last year, reflecting doubling of government borrowing and excess liquidity in the banking system.

Monetary expansion refers to an increase in the overall money supply within the economy, driven primarily by the government’s heavy borrowing from banks and a cut in the Cash Reserve Requirement (CRR) by the State Bank of Pakistan (SBP).

The SBP slashed the average CRR for banks by 100 basis points, from 6pc to 5pc, effective Jan 30. The decision was taken to boost lending to the private sector and accelerate economic growth. The daily requirement was reduced from 4pc to 3pc, unlocking an estimated Rs300- Rs315 billion in liquidity.

However, the US-Israel war against Iran, which began on Feb 28, changed the entire scenario, affecting the economy — particularly oil and gas prices — and creating uncertainty over the availability of these commodities.

Government’s borrowing from banks doubles in over eight months

Government’s borrowing from banks doubles in over eight months

Though the government raised additional funds by increasing oil and diesel prices by Rs55 per litre on old stocks, it also borrowed Rs2.453 trillion from banks, compared to Rs1.27tr last........

© Dawn Business