Additional social spending expenditures mean a higher budget deficit which can be financed by higher borrowings or by drawing down cash balances. The budget deficit will be larger with increased spending, irrespective of cash balances.
The idea that Special Funds cash balances can be used to fund additional budget spending without increasing the budget deficit is false. Special Funds balances are earmarked for project and other spending. If these expenditures are sacrificed, additional social spending can then be done without raising the budget deficit, i.e., by a reallocation of expenditures from special funds to the budget.
The notion that Special Funds balances, estimated at Rs36 bn at June 22, represents fiscal space for additional social spending is wrong !
Using SF balances to finance a given deficit only saves on borrowing costs!!!!
