KARACHI: The federal government borrowing from scheduled banks for budgetary support rose significantly by 116 percent during this fiscal year due to slow foreign inflows and less than target revenue collection.
According to State Bank of Pakistan (SBP), the federal government’s borrowing for budgetary support has increased by 116 percent or Rs 3.649 trillion during 1st July 2023 to 17th May 2024. Overall, the federal government raised Rs 6.796 trillion from the scheduled banks for budgetary support during the period under review compared to Rs 3.146 trillion in the same period of last fiscal year (FY23).
During the period under review, the federal government made a repayment of Rs 479 billion to the State Bank against borrowing of Rs 173.5 billion.
Jul-Mar period: Govt borrowing soars to record high of Rs4.8trn
Analysts said in absence of slow foreign inflows and lower than target revenue collection, the single way to finance the fiscal deficit is borrowing from the scheduled banks. However, they said that this massive borrowing is overburdening the country’s economy as the government is spending a major part of its budget on debt servicing.
As per budget documents, interest payments or debt servicing budget have risen from 85pc last year (FY23) to Rs7.303 trillion for FY24, accounting for 55pc of total current expenditure.
Relative to the federal government, provincial governments repay some Rs 151 billion to commercial banks during 1st July 2023 to 17th May 2024 as against borrowing of Rs 5 million in the same period of last fiscal year.
During the period under review, statistics showed that all provinces have cumulatively repaid an amount of Rs 470 billion to the SBP.
Balochistan government returned a loan of Rs 66.1 billion to SBP, Khyber Pakhtunkhwa Rs 45.6 billion, Sindh government repaid Rs 88 billion and the Punjab government made a repayment of Rs 270.5 billion to the SBP during 1st July 2023 to 17th May FY24.
In addition, the AJK government retired Rs 38.224 billion and Rs 1.1 billion and Gilgit-Baltistan Government borrowed Rs 1.482 billion during the period under review.
Analysts estimate that as the financial crisis still persists, the borrowing from banks could touch Rs 8 trillion mark by the end of June 2024.
Meanwhile, on Wednesday, the State Bank conducted the auction for the sale of short-term government papers and the federal government borrowed another Rs 501 billion. An amount of Rs 165 billion was raised against the sale of 3-month T-bills and cut-off yields set at 21.0001 percent, down by 60bps. Six months T-bills cut-off yields declined by 29 bps to 21.0000 percent with Rs 101 billion and Rs 233 billion were borrowed against sale of 12-month MTBs at 20.1004 percent, fell by 31bps.
In addition, Rs 421 billion were raised through sale of long-term 5- and 10-year Pakistan Investment Bonds (PIBs) in an auction on Wednesday May 29, 2024.
Copyright Business Recorder, 2024
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