The government may not rely on WMA for the entire month as advance tax collections started flowing in the government coffers from mid-June.The government’s cash flows has improved in the past few weeks with probably due to it not spending on projects keeping it away from using higher Ways and Means Advances (WMA), a temporary short term borrowing plan. Last week was the third straight week that the government did not use the WMA
The government refrained from availing WMA since the week ended May 29, for three straight weeks. This is significant considering that the economy has been struggling to pick up activity since the nation-wide lockdown following the COVID Pandemic since end March. The Reserve Bank, as a part of its monetary stimulus package, raised the WMA limit for April-September’21 period twice from Rs 1.2 lakh crore to Rs 2 lakh crore.
” Essentially the case for WMA comes when there is a temporary liquidity issue in terms of income and expenditure” said Madan Sabnavis, chief economist Care Ratings.” The government is not using WMA because it has been controlling expenditure. I don’t think there has been any significant pick up in revenues”.
RBI data shows that the government was regularly availing WMA from the central bank since the beginning of April till the 3rd week of May. In six out of eight weeks, the government’s WMA outstanding on a week-end was more than Rs one lakh crore.
Besides, expenditure control, the government’s market borrowing through bonds as well as tresury bills picked up in June giving it a liquidity comfort. ” There has been a sequential pick up in revenue compared to April and early May, which is not significant” said Soumyajit Neogi, Associate director at India Ratings. ” But the government is using its market borrowing proceeds to meet its liquidity needs which more durable source of funding”.
The government may not rely on WMA for the entire month as advance tax collections started flowing in the government coffers from mid-June. Though the amounts that the government would get through such flows may be much lower than in the previous year, it could be helpful in tiding over the liquidity crisis for the government.
Source: indiatimes.com