The State Bank updated its website on December 17, first by repeating the old data of November 12 and then putting on it the data for December 3, probably on December 18. The same data for the weeks ended on November 19 and 26 - being time-barred - were simply ignored.
Almost entire credit to the private sector was extended by commercial banks, meaning that no, or negligible, credit was extended by specialised banks, including ZTBL, PPCB, IDBP and SME Bank.
There is a possibility that some one of them extended some credit but was offset by the retirement of credit to other specialised banks as separate data for individual specialised banks were not available. Some concerned department in the State Bank should ask these banks what was happening to the priority sectors assigned to them to cater to.
Balance sheet of the Banking Department of the State Bank, which inter alia meets the refinance requirements of banks engaged in export financing---another priority sector---revealed that compared with July 2, 2005 figure of Rs 109.5 billion, the outstanding level of refinance availed by banks from the State Bank during FY06 so far stood lower at Rs 104.9 billion, reflecting a decline of Rs 4.6 billion during the last about five months which belies the hopes to meet the targeted export growth ($17.7 billion) except that if it were proved that the banks were not availing the counter finance allowed by the SBP despite their export financing or that the export sector is relying on their own finance- propositions that appear hard to believe.
Among other developments, Government borrowing during the year to December 3 increased to Rs 67 billion compared with the CP target of Rs 120 billion and within it budgetary borrowing reached Rs 84 billion (against a CP target of Rs 98 billion) entirely on account of Federal Government who borrowed Rs 86 billion during the period as against the Provincial governments who retired a little over Rs 2 billion to the banking system.
The Federal government borrowed entirely from the State Bank (up Rs 171 billion) as scheduled banks accounts showed a net retirement of Rs 85 billion. Indeed, this position emerged after the open market operations of the central bank had been adjusted.
The State Bank also rejected the bids of the scheduled banks in a couple of auctions in which they had quoted to buy the government paper but only at higher returns, to which the government and the State Bank did not agree. Accordingly, government's recourse to the central bank's funds---which is surely more inflationary---reached the level it had on December 3.
As a result of the foregoing developments in the private and government sectors borrowing from the banking system and a net draw-down of foreign assets amounting to Rs 98 billion and a massive decline of Rs 68 billion in other items (net), monetary expansion during the year to December 3 was restricted to Rs 106 billion (accounted for by an increase in currency in circulation of Rs 81 billion and an increase in deposit money of Rs 25 billion) against the Credit Plan provision of Rs 380 billion for the whole of FY06. (Feature Report by [email protected])