KARACHI: Pakistan’s caretaker government has made a record borrowing of almost Rs4 trillion from commercial banks so far, a local newspaper reported.
The economy, already crushed under a huge debt burden, may register an unprecedented spike in borrowings at the end of 2023-24 on June 30 as the amount has already surpassed the total borrowed in the entire Financial Year 2023, according to a leading local newspaper.
The State Bank of Pakistan’s (SBP) data showed that the government borrowed Rs3.99 trillion from July 1 to January 19, 2023-24, against Rs1.398 trillion in the corresponding period last year, reflecting an increase of 185%.
This may be strange for many, as the government has been collecting revenues beyond the target set for six months. Despite higher liquidity, the government has been borrowing highly to meet increasing expenses.
Researchers and analysts said that poor economic growth is not generating enough revenue to run the government, which is facing hefty domestic and foreign debts along with increasing pressure to pay the circular debts of the power sector, which has reached Rs 5.7 trillion.
This Rs4 trillion borrowing is too costly for the government, as returns are about 21% and have remained around the same during the entire financial year FY24, so far.
The banks are the main beneficiaries of this huge borrowing. Most banks have succeeded in doubling their profits in the calendar year 2023.
Total government borrowings from banks in FY22, FY23
In FY22 and FY23, total government borrowings from banks were Rs3.448 trillion and Rs3.716 trillion, respectively. Analysts watching the situation in the background of the polls and the formation of a new government are not hopeful for lower borrowing in the coming months.
The polls will be held on February 8, and the formation of a new government may take up to two months. The whole period will remain surrounded by a high degree of political uncertainties, which would be a negative scenario for the economy’s stakeholders. It is expected that no investment will flow in during growing political uncertainties.
