Budgetary support during Jul 1-Dec 16, 2023 period: Govt borrowing jumps 200pc to Rs2.876trn YoY

KARACHI: The cumulative borrowing by the federal and provincial governments for budgetary support from the domestic banking system rose by 200 percent during this fiscal year (FY24) so far.

The State Bank of Pakistan (SBP) on Tuesday reported that the federal and provincial governments cumulatively borrowed Rs 2.876 trillion during July 1, to Dec 16, 2023 from the domestic banking system against Rs 961 billion in the same period of last fiscal year (FY23), depicting an increase of Rs 1.915 trillion. The entire amount was borrowed from the SBP and scheduled banks to finance the fiscal deficit.

The major borrowing was made by the cash-strapped federal government for budgetary support. The federal government borrowing increased by 172 percent or Rs 1.855 trillion during the period under review. The federal government’s borrowing for budgetary support from the domestic banking system surged to Rs 2.932 trillion as of December 15, 2023.

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Out of total borrowing, the federal government raised Rs 2.897 trillion from scheduled banks between July 1, 2023 to Dec 16, 2023 as against Rs 1.147 trillion in the same period of last fiscal year (FY23), showing an increase of 152 percent or Rs 1.75 trillion.

During the period under review, the federal government borrowed Rs 35 billion from the SBP as against repayment of Rs 70 billion in the corresponding period of last fiscal year.

Analysts said that in absence of sufficient external inflows the federal government is fully dependent on the domestic banking system to finance the rising fiscal deficit. The government is likely to borrow more from the scheduled banks in the second half of this fiscal year as there are rare hopes of foreign inflows.

Provincial governments’ cumulatively borrowed Rs 66.813 billion from SBP and returned Rs 108 billion to the scheduled banks during this fiscal year.

Balochistan government returned Rs 22.575 billion and Sindh government Rs 11 billion to SBP during the period under review. However, Khyber Pakhtunkhwa borrowed Rs 22 billion, and Punjab government Rs 78 billion from the SBP to meet their financial needs.

The IMF executive board is going to meet in January to formally approve the release of a second tranche worth $700 million of the SBA programme of $3 billion to bailout Pakistan from the foreign exchange reserves crisis.

Copyright Business Recorder, 2023