There is no free lunch - especially when it comes to finance government
expenditure and revenue gap. On a good note, fiscal inflationary borrowing from central bank is and
expected to remain below the ceiling of September end level of Rs 1290 billion, the dark side is that the
onus of funding is tilting more towards commercial banks as foreign funding is elusive. SBP feared that this
trend is to continue.
"In our view, banks would be happy with this, as it reduces their risk-weighted assets, which is especially
important given the increase in NPLs.... Commercial banks appear almost to have given up their role as
financial intermediaries", SBP second quarterly report highlighted.
The reading between the lines is that the taxpayers are financing the windfall profits of commercial banks.
This is a profound implication and needs to be resolved by a combination of regulatory and legislative
measures. Some argue that the banks'' tax rates are to be increased, however, this or status quo could come
under the domain of policy inaction. State Bank ought to work on to pass on the benefit to banks'' deposit
holders to squeeze spreads and apply limits on fiscal lending to force banks by moving away from the lazy
behaviour of risk free lending to finance SMEs, agriculture sector and the corporate.
