Rising budgetary deficit and decline in the foreign inflows has compelled the federal government to borrow more from local sources.
Therefore, the country’s domestic debts are gradually increasing due to increasing expenditure, besides there is significant raise in fiscal deficit and slow down in the process of privatization.
Central bank statistics revealed that country’s domestic debts have shot up by Rs225 billion to new peak of Rs2.822 trillion during the first five months of the fiscal year 2008.
Country's overall domestic debts including permanent debt, floating debt and un-funded debt stocks have registered a growth of 8.64 per cent or Rs225.340 billion during July-November of the running fiscal year.
After the current upsurge the domestic debt and outstanding stocks had reached unprecedented level of some Rs2.822 trillion at the end of November 2007, that earlier stood at Rs2.596 trillion on June 30, 2007.
This tremendous raise in debt stock is driven by growth in the floating debt category, which went up by 14  per cent during the first five months of fiscal year 2008.
The over all floating debts has touched the level of Rs1.264 trillion in November 2007 as against Rs1.107 trillion in June 2007, depicting an increase of some Rs156.65 billion during the first five months of the current fiscal year.
The floating debt includes three months treasury bills, Market treasury bills and MTBs for Replenishment
Permanent debts, which includes market loan, federal government bond, income tax bond etc, has gone up by 7.49 per cent or Rs41.434 billion to Rs594.409 billion during the July-November 2007 as compared to Rs552.975 billion that was the case in June 2007.
Un-funded debt, based on national saving amounted to Rs963.336 billion in November 2007, it earlier stood at Rs936.081 billion at the end of last fiscal year 2007, depicting a jump of Rs27.255 billion during the first five months of the current fiscal year 2008.
Economists view that higher fiscal deficit and low privatization processed has pushed the domestic outstandings during the first five months.
They said that presently the government is also increasing its borrowing from the saving schemes and borrowing from saving schemes would further go up, as government is likely to revise its interest rate in upward side during the running month.
Every year review of the national saving is issued in January, however till to date the revised rate has not been issued. "If the interest rates of saving scheme would increased than it is expected that government would further borrow from unfounded debts,'' they said.
It may be mentioned here that the central bank already has shown its serious concern on the rising government budgetary borrowings and has issued a tight monetary policy to curb the increasing inflation.
State Bank of Pakistan has also shown serious concern and has urged the government to control their expenditure and retire the borrowing from the local banking system as well as SBP.
Dr Shamshad Akhtar, Governor, State Bank of Pakistan has also said that the government is getting more borrowing due to the increasing budgetary expenditures.
Talking to newsmen she said although the government has assured the State Bank that it will retire this borrowing during the next two to three months, however the rising government borrowing is a negative sign for the economy.
"Federal government would retire it's borrowing in the April or May after the issuance of Global Depository Receipts (GDR), as presently the external inflows are not sufficient", she added.
She said that rising fiscal and current account deficits along with excessive government borrowing from the State Bank prompted the central bank to raise its key policy rate.
SBP statistics revealed that borrowing in the Pakistan investment bond has gone up by Rs43.213 billion to Rs395.733 billion during the first five months, while borrowing in the prize bond has raised by Rs9.007 billion to Rs183.52 billion during the same period.
Borrowing from the market treasury bills has reached Rs721.706 billion from Rs656.098 with the surge of Rs65.68 billion during the July-November of current fiscal year.
Debt through the Defence Saving Certificates has increased by Rs3 million to Rs290.141 billion from Rs290.138 billion in the first five months.
Economists believed that if the budgetary borrowing would not decline further then it is expected that SBP would further tighten the monetary policy in the future and impose some restriction on the government on borrowings from the local banking system.