NEC raises borrowing limit for provinces to Rs300b

From the new financial year 2017-18, the National Economic Council (NEC) has given the go ahead for doubling the borrowing limit for all four provinces. This move would allow all the provinces to get loans domestically to the tune of Rs300b double the amount that was given previously which stood at Rs153b.

Although the provinces had failed to fully utilize the limits available in the current financial year, the limit has been increased to 0.85pc of GDP by the NEC which stood at 0.5pc in 2016-17. According to sources, the Minister of Finance Ishaq Dar had voiced his opposition to this move and had proposed a borrowing ceiling rate of 0.7pc of GDP because he felt it would harm the national economy framework.

This policy of allowing domestic borrowing to the provinces was started in June last year by NEC. At 0.85pc of the GDP, the borrowing limit domestically for all the provinces stands at a maximum of Rs307b. Any loans already borrowed by any provinces from the federal govt will include this maximum borrowing limit. Furthermore, the borrowing limit is divided between the provinces on account of population hence the major share goes to Punjab because of this.

According to Punjab’s Finance Minister, Dr Ayesha Ghaus Pasha “The Punjab government will adhere to the principles of fiscal prudency and, as a responsible government, will not resort to any reckless borrowing.” She mentioned that the Punjab government had only borrowed in the current FY 2016-17 when it was needed and the process of paying back the loans had already been initiated.

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