Karachi [Pakistan]: The Pakistani government has borrowed approximately Pakistani currency (PKR) 3.2 trillion from scheduled banks between May 15 to June 28 of the fiscal year 2023-24, this works out to an average of 71.8 billion PKR per day, Dawn reported
This borrowing spree comes despite a 30 per cent increase in revenue generation compared to the previous year.
The government’s reliance on borrowing suggests high spending levels. Meanwhile, the recently announced budget for the next fiscal year aims to generate 40 per cent more revenue than the previous year, partly through increased taxation, as per Dawn.
Although the government has been hinting at imposing more taxes to increase revenue, there seems to be little effort to curb spending in order to avoid borrowing.
Government borrowing from scheduled banks reached a record high of PKR 8.564 trillion during FY24, more than twice the PKR 3.716 trillion it borrowed during FY23.
The borrowing for the last 45 days of FY2 PKR 3.2 trillion was incidentally close to the entire borrowing in FY23. These borrowings come at a staggering cost since the interest rate is as high as 22 per cent, according to Pakistani news outlet.
The Pakistani government has borrowed a substantial amount of money to pay off its domestic debts, totalling 6.55 trillion PKR during the year.
The government has been exhorting the nation to be ready for more sacrifices in the wake of ongoing talks with the International Monetary Fund (IMF), but has shown reluctance to stop its lavish spending.
The economy is facing significant strain, with fixed investments plummeting to a 50-year low. The government consistently reduces its development programs, and the private sector’s borrowing from banks has almost ground to a halt due to high interest rates of 22 per cent. All these factors combined to restrict the growth rate to a miserable 2.38 per cent.
The government has set a 3.5 per cent growth target for FY25, but a ballooning debt servicing liability, a high interest rate despite low inflation and a slump in economic activities by the private sector is unlikely to allow economic managers to reach the target.
The government raised PKR 442 billion against the target of PKR 150 billion through the auction of treasury bills on Wednesday.
The government has lowered the interest rates on short-term loans by a small margin. The interest rate for three-month loans decreased by 0.1 per cent to 20.04 per cent, and the rate for six-month loans decreased by 0.18 per cent to 19.78 per cent .
The interest rate for 12-month loans remained unchanged at 18.54 per cent . The government borrowed a total of PKR 454.7 billion (approximately PKR 1.9 billion) through these loans, with PKR 87.4 billion of that amount borrowed through a non-competitive process.