KARACHI - Despite maintaining aggressive fiscal and monetary stance, the government's inflationary and budgetary related borrowings from the State Bank have sharply widened to Rs 376 billion from July to November, 2008. In the corresponding period of last fiscal, the government's borrowings from SBP amounted to only Rs75 billion, State Bank of Pakistan reported on Thursday. In a sharp contrast to the government's commitment to retire the stock of domestic borrowings from the State Bank, the government has borrowed Rs 376 billion from July 01 to November 15, 2008. The monetary indicators for the period under review showed that the gross government sector borrowings from the domestic banking system had stood at Rs 211 billion during 135 days of current financial year (FY09) which is seemed as "highest-ever" in the fiscal history of Pakistan. From the period of July 01 to November 15, the SBP and scheduled banks had disbursed Rs 206 billion to the government for inflationary financing and budgetary support. Similarly, the government had also acquired Rs 169 billion from the scheduled banks during the 5 months of FY09. The Nation has learnt that in an effort to make other debt-financing instruments more effective, the Government is likely to offer higher returns on PIBs and National Saving products in line with IMF agreement which has been specified government's commitment to stop borrowings from the central bank as an one of the basic conditions to be fulfilled by the government during the course of current and next financial years to get IMF financial assistance program for achieving economic stability. The government is planning to raise interest rates on National Saving Schemes by 200-400bps to 15-18 percent probably by the next month of this fiscal with an aim to bring the offered rates in line with secondary market PIB quotes that are currently hovering between 16.5-18.0 percent on 10-year paper. According to details, government has set an ambitious target of raising Rs150bn from various NSS schemes in FY09, which is almost twice the amount of Rs81bn received in FY08. However, due to low return offered when compared with record high inflation, net NSS deposits in first quarter (July-Sep) FY09 were recorded at Rs20.9bn, 7% lower than Rs22.5bn attracted in corresponding period last year. While government did increase NSS rates effective Oct 1, 2008 the current rates ranging between 12-15% are still not attractive enough to achieve the ambitious target. This makes it all the more difficult for the government to honour its commitment of net zero borrowing from the central bank in FY09, which currently stands at Rs369bn as of Nov 08, 2008. With commercial banks aggressively raising deposits at 12-15% (offered on different term deposit schemes), the government eventually has to rely on raising funds through government bonds (PIBs) and National Saving Scheme (NSS). Farhan Rizvi, Research Analyst at JS Global held the view that due to the current liquidity situation, the only way government would be able to raise any significant amounts through NSS is to increase the rate on return on the different schemes. In particular, Defence Savings Certificates (DSC) and Special Savings Certificate (SSC) whose current rates at 12.15% and 12.80% respectively are lower than return on fixed deposits currently offered by banks. Ever since the last revision in NSS rates, SBP has increased the policy discount rate by 200 bps. Finance Advisor Mr. Shaukat Tarin in a recent press briefing on the salient features of the IMF program also mentioned revision in NSS rates as the next step towards monetary stabilization.