KARACHI: The federal government’s borrowing for budgetary support from the domestic banking system has dropped sharply by 66 percent during the first eight and a half months of the current fiscal year (FY25), driven primarily by higher foreign inflows and record profits from the State Bank of Pakistan (SBP)
According to the SBP, the federal government borrowed Rs 1.386 trillion for budgetary support from the domestic banking system between July 1, 2024 to March 14, 2025, compared to Rs 4.06 trillion during the same period last fiscal year (FY24), reflecting a sharp decline of Rs 2.68 trillion.
During the review period, the federal government borrowed Rs 116 billion from the State Bank for budgetary support, compared to a net retirement of Rs 408 billion in the previous year.
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The bulk of government borrowing came from scheduled banks, as the IMF has imposed some restrictions on borrowing from the SBP. During July 1, 2024 to March 14, 2025, the government raised Rs 1.27 trillion from scheduled banks, significantly 71 percent lower than the Rs 4.4 trillion borrowed during the same period last fiscal year.
Analysts said that lower-than-targeted revenue collection forced the government to rely on domestic banks to finance the fiscal deficit. However, on a positive note, borrowing from scheduled banks has declined, mainly due to record profits from the SBP, which were transferred to the government’s account.
They believed that this sharp reduction in the budgetary borrowing from domestic systems marks a significant shift in the federal government’s fiscal strategy, driven by the transfer of over Rs 3.4 trillion in record profits from the SBP. This substantial inflow has helped the government ease its debt burden and reduce reliance on domestic borrowing, they added.
Analysts noted that with Pakistan and the IMF reaching a staff-level agreement for the release of the EFF program tranche, the country is set to receive $1 billion foreign inflows very soon. These inflows are expected to pave the way for additional funding from other international financial institutions.
Compared to the federal government, provincial governments repaid more than double the approximately Rs 735.58 billion to SBP and scheduled banks between July 1, 2024 to March 14, 2025 as against Rs 312.36 billion were repaid during the same period last fiscal year.
According to official statistics, during the review period, all provinces collectively repaid Rs 529.34 billion to the SBP. Among individual provinces, Balochistan repaid Rs 38.75 billion to the SBP, Khyber Pakhtunkhwa Rs 77.43 billion, Sindh Rs 226 billion, and Punjab Rs 187 billion between July 2024 and March 14, 2025.
Additionally, the Azad Jammu and Kashmir (AJK) government retired Rs 39 billion, while the Gilgit-Baltistan government repaid Rs 12 billion during the same period.
Copyright Business Recorder, 2025
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