The government has announced that it has borrowed Rs 49,000 million ($1,432 million) in the first five months of fiscal year 1995/96 compared with a target borrowing requirement of Rs 30,000 million ($877 million) for the entire year. The announcement indicates that the target budget deficit of 5 per cent of gross domestic product (GDP) for the year 1995/96 is most unlikely to be achieved, analysts say.
The original 1995/96 budget failed to accord with IMF recommendations, which included a deficit of 4 per cent of GDP. This resulted in the suspension of the two-year-old enhanced structural adjustment facility (ESAF) programme (MEED 30:6:95). The IMF has recently given preliminary approval for a standby credit of about $600 million. It is hoped that the standby agreement will lead the way to the resumption of the structural adjustment programme (MEED 8:12:95).
VA Jafarey, adviser to the Prime Minister on financial and economic affairs, has played down the disappointing figures for the first five months of the year. He said that it was not unusual for borrowing to exceed targets at this stage due to revenue schedules. He stated that revenue flows towards the end of the year have in similar situations allowed the government to meet its targets. However, Jafarey also stated that government departments had not observed spending limits and that spending restraints will be introduced in order to control tendencies to overspend.
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