KARACHI - The size of governments total borrowings from the State Bank has substantially decreased by Rs149 billion during July-October FY10. From July 01 to October 3, 2009, the federal government borrowed Rs73.5 billion for public spending and investment, constituting budgetary and inflationary related expenditures from SBP as against of Rs222 billion during the same period of last fiscal year. Whereas such borrowings from scheduled banks saw an increase of Rs12 billion as amounted to Rs117.6 billion during 1st July - 3rd October, FY10 from Rs105.6 billion earlier in the period under review. This trend has showed some improvements in the fiscal account of the government and liquidity position of the domestic financial and capital markets during said months of ongoing financial year. In the period July-October FY10, the government borrowed Rs42.563 billion from the banking system for financing its budgetary and commodity operations as compared to Rs 106 billion. This indicated a decline of Rs63.437 billion in the overall stock of the federal governments borrowings. According to SBP data on monetary aggregates, Centers net borrowings for budgetary slashed by Rs72 billion whereby the scheduled banks lent Rs44.126 to Government of Pakistan and Ministry of Finance through market treasury bills of different maturities, PIBs and MRTBs in July-October, FY10 from Rs116.94 during the corresponding period of FY09. Governments borrowings for commodity and other operations stood at Rs100 million as against of Rs14.916b in FY09. SBP provisional figures further revealed that credit to the private sector continued to show negative growth during July-Oct FY10 as it dropped to Rs78.319b negative from Rs81.632b of last fiscal year. Nonetheless, credit to Public Sector Enterprises (PSEs) witnessed surge in growth and swelled to Rs65.747 billion during analytical period of prevailing financial year as against Rs62.500 billion of the same months of last year. SBP credit to NBFIs contracted to Rs20 million negative as compared to Rs16 million negative during July-October of previous financial year. Despite witnessing improvement in the SBPs foreign exchange reserves, the stock of Net Foreign Assets (NFA) during 1st July -03 Oct 2009, compressed to Rs131.8b from Rs186 billion in FY09 while NDA witnessed Rs133.2b negative as compared to Rs168b of last fiscal year. The broad money (M2) growth recorded a decline of 0.03 per cent over the corresponding period of FY08. Money market experts claim that likely reversal in financing pressures along with the retirement of wheat financing and improvement in external flows is expected to improve the market liquidity in the coming months and flow of credit to the private sector.