Government borrowing from banks soars sevenfold to Rs3.585 trillion
Government borrowing from banks in the initial five months
of the current fiscal year has surged sevenfold, totaling Rs3.585 trillion,
according to recent data from the State Bank of Pakistan (SBP). This
substantial increase from the Rs516 billion borrowed in the same period last
year reflects an aggressive approach to funding amidst heightened
inflation.
The borrowing from July 1 to Dec 8 FY24 already equals the
total borrowing in the entire FY23, which amounted to Rs3.7 trillion. The
government's borrowing spree has led banks to invest a significant portion of
their liquidity in risk-free papers. In a recent auction on Dec 13, the
government received bids totaling Rs4.6 trillion, selecting Rs2.6 trillion from
the pool.
Government
repays Rs. 750 Billion to SBP, borrows Rs. 500 billion from scheduled banks
Despite the boost in revenue growth, reports suggest that
the government is considering reducing the Public Sector Development Programme
(PSDP) to curtail expenditure. This decision has sparked concerns as
development spending is crucial for economic growth, and the move seems contradictory
given the elevated revenue collection and record borrowing.
Although the Federal Board of Revenue (FBR) exceeded targets
for the five-month and November collections, government spending has surged due
to a 29 percent inflation rate. The government's revenue has also increased,
creating a challenging situation attributed to the impact of inflation.
Data from the SBP reveals that the government borrowed Rs3.1
trillion for budgetary support from July 1 to Dec 8, compared to Rs1.1 trillion
during the same period last year. Despite the authorization of Rs302.6 billion
for various social sector uplift projects under PSDP, out of a total allocation
of Rs940 billion for July-November 2023-24, fund utilization is reported to be
lower than anticipated.
Pakistani
government seeks Rs8.5 trillion in loans from banks to address budget shortfall
Media reports indicate that the caretaker government has
decided to terminate 137 development projects under the PSDP, valued at Rs116
billion. An IMF report titled "Pakistan: Technical Assistance Report —
Public Investment Management Assessment" concludes that Pakistan's PSDP is
financially unsustainable, with the total cost of project completion reaching
Rs10.7 trillion—over 14 times the budgeted allocation of Rs727 billion in the
last fiscal year.
Source: Profit Pakistan