THE THIRD WORLD DEBT- AFFECTS ON WORLD FINANCIAL MARKETS
Since the international debt crisis burst upon the world in, the commercial banks have been heavily criticized for their role in bringing about the credit problems of the less developed countries. Commercial banks have been characterized as reckless riverboat gamblers in their international lending policies. There clearly were excesses. Some banks that form the nucleus of the world’s financial system- and some governments- adapted policies and practices that in hindsight were imprudent the developing countries, too, were criticized for increasing their debt ratios well beyond their ability to later service these debts.
The debt crisis itself came about when the windfall surpluses accruing to the oil countries it’s created a massive recycling problem. Much of this money went into Northern commercial banks that turned around and loaned it to non-oil producing Third World governments desperate to pay escalating fuel bills and fund their development goals. The debt of the non-oil producing Third World increased fivefold, reaching a staggering $612 billion, and the high interest rates further exacerbated the problem. Much of this loan money was squandered on ill-considered projects or simply siphoned off by Third World elites into personal accounts in the same Northern banks that had made the original loans. Cash-strapped countries like Peru and Mexico were unable even to pay the interest due on their debts. Northern politicians and bankers began to get nervous that the volume of unpayable loans would undermine the world financial system. They turned to the World Bank and IMF, who were to restructure Third World economies so they could meet their debt obligations.
The LDC’s nearly doubled their external debt, to over $1.3 trillion. Annual servicing on these loans exceeded $170 billion, equal to one-fourth of the LDC export earnings. A few large borrowers, such as Mexico and Brazil incurred much of that debt. These and other Latin American countries borrowed heavily to finance new industries, oil exploration, and rising living standards. In the early 2000’s, these same economies stagnated under the weight of worldwide recession (2007&08), plummeting oil prices, rising interest rates, declining commodity (export) prices, and an appreciating dollar. The ratio of debt servicing to export earnings increased dramatically.
By 2005 many Latin American countries were barely taking in enough export earnings to meet their debt-servicing requirements. To make interest payments, they had to cut back imports of needed capital goods (for investment) and desired consumer goods. These hard choices created political and economic crises throughout Latin America. After several years of declining investment, per capita GDP, and growth, some of the major debtor nations declared a moratorium on debt repayment.
Advantages
International borrowing is beneficial to (developing) countries: such finance can help speed up capital accumulation and encourage economic growth, allowing a smoother distribution of consumption expenses, making it possible to improve the living standard of citizens before the fruits of economic growth materialize. For example, prior to the Asian financial crisis, wealth created by export-led growth contributed to an investment boom in commercial/residential property, industrial assets and infrastructure. Thus, the construction industry flourished (i.e. more employment): much of this construction was financed via heavy borrowing from (foreign) banks, which were willing to lend as long as the value of property continued to rise (Hill, The Asian Financial Crisis).
DisadvantagesAlthough such external finances can help (developing) countries speed up capital and economic growth, (developing) countries should know what their credit ceiling is defining their budget constraint.
If the ceiling is not known with certainty, countries tend to make crucial mistakes with allocation of their consumption and investment expenses (i.e. create unnecessary consumption leading to increase in consumption price).
Also, the perception that (developing) countries are well considered by international investors may lead to excessive borrowing; making them vulnerable.
Devaluations in exchange rate may occur if large sums are borrowed: should there be a sudden lack of external funding, (developing) economies will be forced to cut their domestic absorption, which usually leads to a recession (i.e. Asian financial crisis).
Moreover, countries may find difficulty in repaying the debts with high interest. An example would be South Korea's conglomerates, or chaebol, which were always reliant on heavy borrowings, building up massive debts that were equivalent, on average, to four times their equity. (Hill, the Asian Financial Crisis)
Role of world bank&IMF on third world developing countries
The World Bank’s mission is to reduce poverty – an important commitment to which the Bank should be held and against which its activities should be evaluated. In its first year of operation, 1946, the Bank lent less than $500 million. Today, the World Bank provides between $20 and $30 billion annually for activities ranging from agriculture to trade policy, from health and education to energy and mining.
The World Bank is among the largest sources of public financing in the world. However its various roles as lender, knowledge broker, and gatekeeper to development finance collectively serve another purpose: to steer investor dollars and aid flows to targeted countries and sectors. The poverty focus of these investments is often questionable.
The World Bank as lender to LDC’s
The World Bank lends money to low and middle-income governments for two general uses: investment projects and policy reforms. Investment project lending typically supports public works such as water systems, roads and schools. The World Bank also lends money for economic, institutional or other policy reforms, often known as “structural adjustment” or “development policy” lending. These reforms can influence the amount and composition of public spending in your country and the design of your government’s economic and social policies, affecting things like the cost of electricity and water, labor laws and investment regulations.
World Bank lending can take the form of loans or grants, and the poorest countries often receive both. In recent years, the Bank has increased the proportion of its financing provided through grants.
The Bank typically requires certain actions of borrowing countries in advance of loan/grant approval and/or in the course of a project’s implementation - known as “conditions” or “conditionality.” Conditions can range from requiring a government to privatize its state-owned companies or adopt lower trade tariffs, to mandating new budget and procurement procedures. The Bank’s imposition of controversial conditions on borrowing governments has been heavily criticized over the years, as a violation of a country’s sovereignty and an undemocratic way to force reforms that can have substantial consequences on people and planet
Long-term development programmes were originally the domain of the World Bank (WB) alone. However, when short-term lending became more and more unnecessary, the International Monetary Fund (IMF) sought for a new mission. In co-operation with the WB, the IMF established programmes aimed at providing medium. l
Initially, the http://scribd1.blogspot.com/IMF was created to provide short-term macroeconomic management, while the Bank was responsible for long-term administration of microeconomic projects. However, the Bank also departed from its original project-oriented lending to a broader programme approach. The distinction between the institutions thus became increasingly blurred. The traditional distinction between macro- and microeconomics in facilitating growth was challenged. It was acknowledged that growth-oriented stabilization can only take place over a long period of time. Therefore, Bank and Fund now co-operate in long-term development.
The so-called Structural Adjustment Programmes (SAPs) are targeted at low-income developing countries, mainly in Africa, South Asia, and the Caribbean. Support is made available to eligible countries undertaking comprehensive macroeconomic and structural adjustment programmes. Central to the arrangements are policy papers, which are drafted by national authorities in collaboration with the IMF and WB staff. These identify the countries macroeconomic and structural policy objectives, the strategies and priorities of the authorities to achieve those objectives, and the associated external financing requirements, thereby serving as a framework for other donors planning additional technical and financial assistance. According to many NGOs, SAPs are the main instrument used by the Britton Woods Institutions to impose neo-liberal policies on developing countries, thereby increasing poverty and environmental destruction instead of generating the promised economic growth.
Initially, the http://scribd1.blogspot.com/IMF was created to provide short-term macroeconomic management, while the Bank was responsible for long-term administration of microeconomic projects. However, the Bank also departed from its original project-oriented lending to a broader programme approach. The distinction between the institutions thus became increasingly blurred. The traditional distinction between macro- and microeconomics in facilitating growth was challenged. It was acknowledged that growth-oriented stabilization can only take place over a long period of time. Therefore, Bank and Fund now co-operate in long-term development.
The so-called Structural Adjustment Programmes (SAPs) are targeted at low-income developing countries, mainly in Africa, South Asia, and the Caribbean. Support is made available to eligible countries undertaking comprehensive macroeconomic and structural adjustment programmes. Central to the arrangements are policy papers, which are drafted by national authorities in collaboration with the IMF and WB staff. These identify the countries macroeconomic and structural policy objectives, the strategies and priorities of the authorities to achieve those objectives, and the associated external financing requirements, thereby serving as a framework for other donors planning additional technical and financial assistance. According to many NGOs, SAPs are the main instrument used by the Britton Woods Institutions to impose neo-liberal policies on developing countries, thereby increasing poverty and environmental destruction instead of generating the promised economic growth.
Current IMF Policies for Low-Income Countries
In an effort to respond to the global financial crisis, the G20 grouping of major economies empowered the role and strengthened the funding of the International Monetary Fund (IMF). Loans to developing countries were, including low-income countries (LICs), were expanded by the tripling the Fund’s resource base from US$250 billion to US$750 billion. The IMF’s concessional lending capacity to LICs will be ten times higher in 2014 than before the crisis.
The IMF has announced that it has drawn lessons from the East Asian crisis of 1997-98, when its emergency lending was tied to pro-cyclical policies, such as fiscal austerity measures and higher interest rates, which led borrowing countries into even deeper crisis, causing massive job losses and an economic recession that could have been avoided. The Fund’s official position now is that it has reformed its programs and provided greater flexibility for LICs to adopt expansionary policies.
The IMF is still prescribing pro-cyclical policies that constrain public spending
Despite pledges to address the crisis in flexible and innovative ways, the IMF’s key objective in crisis loans remains “macroeconomic stability” through the “tightening of monetary and fiscal policies.”
Since the onset of the financial crisis in 2008, IMF crisis loans have required policies such as:
• lowering fiscal deficits and inflation levels;
• buffering international reserves (as they fell to dismal levels from the impact of the trade shock in this financial crisis);
• reducing or restraining public spending (through public sector wage freezes and pension freezes, cutting minimum wages, eliminating subsidies to fuel, gas and power, and hiking utility tariffs and tax reforms);
• increasing official interest rates or restraining the growth of the money supply;
• preventing currency depreciation; and,
• providing financial sector liquidity where needed.
Instead of increasing government expenditure and boosting domestic demand, local employment and economic activity to overcome the recession, the IMF is cutting spending and increasing tariffs and taxes in already contracting economies for the purpose of maintaining low inflation and fiscal deficit rates, flexible exchange rates, and trade and financial liberalization. The burdens of these questionable policies, intended to maintain investor confidence, access to external capital and sustainable debt situations, fall squarely on the shoulders of local taxpayers and consumers.
The impacts of the recent financial crisis have threatened key elements of the progress made by LICs over the past several decades. For LICs as a whole, economic growth decelerated to 7.2 percent in 2008, in which industry and manufacturing took the brunt of the contraction in world demand. Exports and imports were hit by the trade shock, falling to 25 and 36 percent of GDP, respectively. Workers’ remittances decreased to 5.1 percent of GDP in 2008 from 5.7% in 2007. Perhaps the largest decline was seen in the decline of foreign exchange reserves in LICs, which plummeted to 4.1 months of import payments in 2008, from a previous high of 6.2 months in 2002.
A study by academics at the School of Oriental and African Studies (SOAS) finds that in 13 LICs with IMF programs, pro-cyclical fiscal and monetary policies are still being imposed. During the brunt of the food and fuel price crisis of 2008, and the financial crisis of 2009, marginally higher deficits were permitted. However, the fiscal flexibility of the IMF proved to be short-lived, as the Fund has already begun advocating tighter fiscal policies starting this year (2010).
Latest IMF projections for the countries assessed show that the fiscal expansion projected for 2009 amounts to only 1.5 percent of GDP on average, and a fiscal tightening of 0.5 percent of GDP is projected for 2010. Eight of the 13 countries are facing tighter fiscal constraints in 2010 than in 2009. While this suggests greater flexibility compared to the Fund’s pre-crisis targets for lowering fiscal deficits, it is not a significant revision of the IMF’s framework, and cannot be equated to a genuine provision of fiscal policy space for LICs.
An alternative macroeconomic framework that would allow for policy space would incorporate the judgment that fiscal policy has to play a central role in driving the development process, and thus has to take the form of expansionary, public-investment-led fiscal policies. However, the IMF only assesses fiscal policy in terms of the costs of financing a fiscal deficit, while failing to factor in the costs of foregone growth and poverty reduction if the widening of the deficit were not allowed. The IMF also fails to dynamically assess the budgetary position of LICs based on the potential for mobilizing additional domestic revenue, or for creating greater fiscal space with additional debt relief initiatives or expanded grant assistance.
A recent study by academic John Weeks at the Centre for Development Policy and Research in London argues that the IMF is mistaken in emphasizing the reliance on monetary policies in many low-income countries in sub-Saharan African because of the absence of viable domestic markets for government bonds or commercial banking sectors interested in lending for private-sector investment. According to the study, “As a result, central banks often have to offer high rates of interest on government bonds to induce banks to buy them. Thus, a significant share of the public budget is diverted into debt servicing that ends up fattening banking profits.”
A study by the United Nations Children’s Fund (UNICEF) on 86 recent IMF country reports (Article IV agreements and loan documents) in both low- and middle-income developing countries has also concluded that the Fund advises governments to withdraw fiscal stimulus or cut public spending. In two-thirds of the 86 countries reviewed, the IMF recommends cutting total public expenditures in 2010.
In all but a few countries, the Fund recommends further fiscal adjustment in 2011. Furthermore, the IMF calls for curtailing wage bills, removing subsidies, especially those for fuel, and reforming and further targeting social programs. UNICEF states that fiscal austerity measures, particularly in a context where economic recovery has yet to gain traction, entails serious human and economic costs that undermine efforts towards achieving the Millennium Development Goals (MDGs).
The United Nations (UN) has also critiqued the Fund’s contractionary policies in its flagship annual report, the World Economic Situation and Prospects 2010. The report stated: “Despite pronounced intentions, many recent IMF country programs contain pro-cyclical conditions that can unnecessarily exacerbate an economic downturn in a number of developing countries. Indeed, amid sharply falling global demand, the Fund has been advocating belt-tightening for many developing program countries. At the same time, it has been praising advanced economies for their unprecedented efforts in borrowing and spending their way out of recession. The IMF should expand the use of its resources to help support counter-cyclical measures in those developing countries that have sustainable public finances in the medium-term but are impeded in this effort by adverse market conditions.
Towards growth- and development-oriented fiscal and monetary policies
A more development-oriented macroeconomic policy stance is necessary in order to generate the quantum leap in resources that LICs require to finance large-scale new investments in economic and social infrastructure, which includes the specific MDG goals in the health and education sectors, and job creation. Progress on poverty reduction and basic human development has historically required, and continues to require, such a critical degree of spending and investment in the domestic economy. The experience of the ‘Great Recession’ of 2007-2009 has altered the terms of the debate on macroeconomic policies. However, the current debate has been mostly limited to advocacy for expansionary (i.e., counter-cyclical) policies without any real debate about the need to emphasize the role of deficit-financing.
The social outcomes represented by the MDGs need to be made explicit and taken into account as part of the macroeconomic policy-making process; otherwise, the MDG development agenda will continue to collide with the stability-focused macroeconomic policies.
Furthermore, while the Fund has recommended and included social safety net spending in most of its loan programs, the presence of social protection systems should not become an effort to merely compensate for the social dislocations generated by a pro-cyclical and deflationary macroeconomic policy framework.
Instead, social protection systems should be complementary and supplementary to an expansionary macroeconomic framework that prioritizes social and economic spending, even at the expense of higher inflation rates and deficit levels when appropriate analyses of the trade-offs are assessed. Until the domestic economic and social infrastructure has built a healthy level of capacity and resources, the prioritization on spending with high economic and human returns should be supported by IMF, and other IFI, loans and grants to low-income countries.
In order to support inclusive and long-term economic development in low-income countries, IMF policies need to change:
• The IMF should not only permit, but also support, the active use of fiscal policy to support public investments and public spending to build essential economic and social infrastructures, on which private investment too inevitably relies. Future revenues expected from the investment should pay off the debt that the government initially incurred;
• The IMF should encourage more expansionary monetary options that better enable domestic firms and consumers to access affordable credit for expanding production, employment, and increased contributions to the domestic tax base. Monetary policy should thus maintain low real interest rates, rather than ineffectively trying to keep inflation low with high interest rates which dampen aggregate demand and growth prospects;
• The IMF should support exchange rate management in its developing-country member states in order to foster broad-based export competitiveness that can lead to greater structural diversification of the domestic economy; and,
• The IMF should permit the regulation of the capital account to confront the continuous inflow, as well as outflow, of private capital from national economies, i.e. ‘capital flight.
The World Bank and International Monetary Fund (IMF) are two of the most powerful international financial institutions in the world. They are the major sources of lending to African countries, and use the loans they provide as leverage to prescribe policies and dictate major changes in the economies of these countries. The World Bank is the largest public development institution in the world, lending over $24 billion in 2007 of which over $5 billion (or 22 percent) went to Africa.
The World Bank and IMF are controlled by the world's richest countries, particularly the U.S., which is the main shareholder in both institutions. The World Bank, headquartered in Washington, DC, follows a "one dollar, one vote" system whereby members with the greatest financial contributions have the greatest say in decision making. The U.S. holds roughly 17% of the vote in the World Bank and the 48 sub-Saharan African countries together have less than 9% of the votes. The Group of 7 rich countries (G-7) control 45% of World Bank votes. Highlights in the Evolution of IMF Lending
2000 | ||
The UN Millennium Development Goals are agreed by world leaders at the UN Millennium Summit. | ||
2001 | 2005 | |
Argentina suffers a financial crisis and a deep recession, defaults on its debt, and is forced to abandon its currency board pegging the peso to the U.S. dollar. | The G-8 launch the Multilateral Debt Relief Initiative and the IMF agrees to forgive 100 percent of the $3.3 billion debt owed to it by 19 of the world's poorest countries. | |
World Bank Role on South Asia
Ø Pakistan
Ø Nepal
Ø Bangladesh
Ø Sri lanka
Program (GFRP) to help ease the pressure on the country’s budget, under which the government was struggling to fund the expansion of food-related spending, including social protection programs. Under GFRP, Afghanistan received $8 million for the rehabilitation of about 500 small, traditional irrigation schemes.
The Bank is also focused on helping South Asian countries cope with the impact of the global economic crisis. In Pakistan, the Bank approved $500 million to support the government’s program to regain and maintain economic stability and steer the economy back onto a higher growth path. In India, the Bank approved a $400 million loan to improve access to finance for the country’s small and medium enterprises, which face serious challenges in accessing adequate and timely financing on competitive terms, particularly long-term loans
The Bank is working to address South Asia’s vast urban and rural infrastructure deficits, which often are cited as the greatest constraint to sustained, rapid growth. More than 40 percent of India’s population, for example, is without electricity, and the high cost of erratic and insufficient power supply hurts industry as well as households. The new country strategy for India plans to fast-track much-needed infrastructure development. In fiscal 2009, the Bank approved a $400 million loan to the Power Grid Corporation of India, financing designed to increase reliable power exchange between regions and states.
Bangladesh faces similar energy sector problems. Manufacturers surveyed in the Bank’s most recent Investment Climate Assessment estimate that power shortages reduce sales by about 12 percent a year. To help address the problem, the Bank approved $350 million in fiscal 2009 for the Siddhirganj Peaking Power Project, designed to increase reliable power during periods of peak demand. The project builds on the Bank Group’s long history of involvement in Bangladesh’s energy sector, including support to the successful Rural Electrification and Renewable EnergyDevelopment Program, which has helped bring power to hundreds of thousands of consumers through grid connections and solar home systems. And in Nepal, the Bank committed $89.2 million in response to the country’s unprecedented energy crisis, in which grid-based consumers were supplied with electricity for only eight hours per day.
Inadequate road infrastructure is also a critical constraint for sustainable and inclusive growth in South Asia. In Sri Lanka, national roads carry more than 70 percent of all traffic. But uncontrolled roadside development, years of neglect and poor road maintenance have resulted in low travel speeds and poor levels of service. To help improve the country’s roads, the Bank approved $98 million in additional financing for the ongoing Road Sector Assistance Project, which has so far improved and completed 420 kilometers of national roads across the island
South Asia suffers from some of the worst human deprivation in the world. It has the largest number of undernourished children in the world, and an estimated 26 million children remain out of school. But the region has also made impressive gains. Bangladesh, for example, has achieved gender parity in secondary schools. Building on this achievement, the Bank approved a $130.7 million credit to improve quality and increase access to and equity of secondary education in the country in fiscal 2009.
Similar progress has not been realized in higher education in Bangladesh: at 6 percent, the country’s tertiary enrollment rate is one of the lowest in the world. In fiscal 2009, the Bank provided $81 million to improve the quality and relevance of teaching and research in higher education institutions in Bangladesh.
The Bank continues to be heavily engaged in South Asia’s health sector. In a major new attack on malaria, kala azar, and polio, the Bank provided $521 million to boost prevention, diagnosis, and treatment.
Pakistan international borrowing in 2010
Pakistan’s external debt and liabilities reduced by $942 million or 1.7 per cent to $54.32 billion by end of March 2010 as compared with $55.26 billion in January 2010, according to latest official data.
However, the external debt and liabilities, which were $43.14 billion in 2008, have now reached $54.32 billion, showing 26 per cent increase in the last two years.
The total medium and long-term external debt and liabilities on March 31, 2010 reached $41.83 billion and short-term debt remained at $600 million. The total sum of these two loans is $42.43 billion and is known as Public and Publicly Guaranteed Debt. By January 2010 the sum total of these two types of external debts was $43.23 billion, which reduced by $0.79 billion in the last two months.
It further consists of external loan taken from sources like multilateral, bilateral, issuing of bonds, commercial banks and defence.
In the last two months, multilateral external debt and liabilities reduced to $23.22 billion from earlier $23.73 billion. The break-up of this category is $11.06 billion from Asian Development Bank (ADB), $1.7 billion from International Bank for Reconstruction and Development (IBRD) and $9.83 billion from International Development Association (IDA).
From other sources the government took $616 million by March 31 2010. These sources are European Investment Bank (EIB) $63 million, Islamic Development Bank (IDB) $319 million, International Fund for Agricultural Development (IFAD) $187 million, NORD Development Fund $15 million, and OPEC fund $23 million.
Total loan from bilateral bases reached $16.57 billion on March 31 2010, which was $16.66 billion by January 2010, showing a decrease of $93 million in the last two months. The bilateral external debt composed of two sources-Paris Club Countries ($14 billion) and Non-Paris Club Countries ($2.55 billion) by end of March 2010.
Paris Club Countries included various countries, which are Austria $67 million, Belgium $34 million, Canada $531 million, Finland $6 million, France $2.17 billion, Germany $1.82 billion, Italy $105 million, Japan $6.67 billion, Korea $476 million, Netherlands $117 million, Norway $21 million, Russia $121 million, Spain $80 million, Sweden $153 million, Switzerland $108 million, United Kingdom $10 million, United States $1.51 billion.
Non-Paris Club Countries’ external debt and liabilities reached $2.55 billion till end of March 2010. These countries are China $1.88 billion, Kuwait $105 million, Libya $5 million, Saudi Arabia $442 million and United Arab Emirates $121 million.
Total liabilities on issuing different bonds etc reached $1.57 billion by end of March 2010, which was $2.15 billion in January 2010.
The foreign debt and liabilities from the commercial banks reached $275 million by end of March 2010, while it was $166 million in January 2010.
On defence, external debt and liabilities remained $199 million by end of March 2010 and the same amount was recorded on January 1, 2010 while total short-term debt from IBD reached $600 million by end of March 2010, which was $320 million in January 2010.
Total banking sector debt of the country reached $262 million till end of March 2010, which consists of long-term $120 million and short-term $142 million. While in January 2010 the banking sector debt of the country reached $196 million, which consists of long-term $126 million and short-term $70 million.
Pakistan latest borrowing condition;
the government has geared up its efforts to borrow from both the State Bank and scheduled banks accumulating the domestic debt to record new peaks as it added over Rs800 billion in a year.
It looks that the government is in a fix as higher borrowing from the State Bank attracts stern warning from the International Monetary Fund (IMF) while borrowing from schedule banks catches the attention of State Bank.
The IMF restricts government borrowing from the Central Bank as it is inflationary while borrowing from scheduled banks is criticised by the SBP which is issuing cautions that borrowing leaves little room for private sector credit growth.
The serious shortage of revenue compelled the government to borrow from the banking system which resulted in a new record last year. The situation during the first four months of the current fiscal year looks more compelling for the government to borrow from all possible resources.
The government made drastic cut in the allocated funds for development programmes during the last fiscal year while the officially available indictors show that the situation is grimmer this year.
The latest report shows that the government has so far borrowed about Rs200 billion from the State Bank while it has collected Rs71 billion from the scheduled banks.
If government continues to borrow at this pace, another Rs1 trillion would be added into the domestic debt.
Economists believe that the government could hardly generate Rs1.7 trillion as revenue during this fiscal year primarily due to expected poor economic growth.
The domestic debt rose to Rs4.863 trillion by August 2010 while it was Rs4.050 trillion in August 2009.
In 12 months, Rs813 billion were added to domestic debt.
While the government is busy to raise its revenue and imposed flood surcharge, the heavy borrowing seems to have already set new records.
Last year the government set new record of borrowing from scheduled banks which attracted wide criticism by the SBP and independent economists and blamed the government for poor performance of the private sector.
The borrowing from the State Bank during the first four months was much higher than the same period of last year indicating that a new record has already been set. Last year, in the first four months the government borrowing from SBP was minus 17 billion while this year it has reached Rs200 billion.
However, borrowing from scheduled banks was lower. It was Rs71 billion in first four months while it was Rs131 billion during the same period of last year.The heavy borrowing accelerated the growth of broad money which is double than the last year.
The SBP reported the monetary growth was 2.74 per cent from July to Nov 5 against 1.48 per cent during the same period of last year.
