State Bank gives warning signals

KARACHI: The State Bank of Pakistan has issued some warning signals and praised the economy as well. Its second quarterly report issued on Friday shows Pakistan’s short-term debt is on an upward spiral and is bringing under a cloud the government’s ability to repay this debt. And headline inflation has increased to 8.9 percent in the first half of FY14, up from 8.3 percent in the comparable period in the last fiscal year.The report comes after a delay of over three months. While critics of the government have been articulating fears that this delay was used to fudge the national growth figures, the SBP has chosen to maintain a stoic silence over this charge. The SBP report predictably parrots off the government’s usual expectations regarding potential inflows – the release of Coalition Support Fund monies and the materialization of proceeds from the auction of 3G/4G licences before July 2014. Accordingly, says the central bank, an easing up of the fiscal account and a fall off in domestic bank borrowing and debt stock can be expected. The SBP is advocating the deployment of the February-March 2014 inflows for public sector development programme and thinks this may ease the government’s current financing constraint. However, even so, the SBP is urging extreme caution on the issue of government borrowing.