April 15, (LBO) – Pakistan will reduce its borrowings from the Central Bank in the coming months to cut inflation, newly appointed finance minister Ishaq Dar has said. “Government borrowings have been quite excessive from the central bank in the last nine months,” Dar was quoted as saying in Bloomberg at the IMF meetings in Washington.
“What we are doing right now is to reduce maximum government borrowings by the year-end so that we can bring it down to reasonable levels and so it will also help to reduce inflation.”
Central Bank credit (printed money) is used by many third world governments to finance budget deficits, because tax increases are politically unpopular. But money printing eventually drives up inflation to very high levels hurting the poorest sections of society.
Countries that run pegged exchange rate systems in particular are badly hit by even small volumes of central bank borrowings.
In the second half of 2007 Sri Lanka ‘borrowed’ the equivalent of more than 400 million dollars from the central bank, sending the rupee plunging and inflation rocketing up.
Though the money was repaid by the end of the year, analysts say the dama