Govt loans from central bank soar to record high of Rs5.4 trillion

During July-September 2018, the federal government’s overall domestic debt rose to Rs16.9 trillion, increasing by 3% or Rs504 billion


ISLAMABAD: The federal government’s increasing dependence on the State Bank of Pakistan was laid bare on Thursday, with data released showing borrowing soared to Rs5.4 trillion by end of September.

It posted an increase of Rs1.8 trillion or 48% in a duration of three months, reports Express Tribune.

This will be a conundrum for the Pakistan Tehreek-e-Insaf (PTI) government since the International Monetary Fund (IMF) would likely demand for a major decrease in debt stock of the central bank, contingent upon if both sides agree to a deal.

Around half of the addition to the loans obtained from SBP were to pay off commercial bank loans, which are unwilling to invest in long-term government securities in wait of an increase in interest rate.

The central bank on Thursday released figures of the central government debt for July-September 2018 quarter and its total debt rose to Rs24.73 trillion, adding Rs520 billion during the aforementioned period.

And the total increase in central government debt was in toe with the budget deficit posted in the first quarter of FY19.

According to the latest figures released by the central bank, the major worrying thing is the persistent rise in short-term domestic debt which uncovers the government to several interest rate and refinancing risks.

During July-September 2018, the federal government’s overall domestic debt rose to Rs16.9 trillion, increasing by 3% or Rs504 billion.

Shockingly, the share of short-term public debt soared to 57.2% or Rs9.7 trillion by end of September. Short-term debt rose 8.8% or Rs779 billion in July-September 2018.

Also, the federal government retired debt contracted via market treasury bills (MTBs) from commercial banks.

The government’s overall borrowing via MTBs fell from Rs5.2 trillion to Rs4.3 trillion, a decrease of Rs971 billion in three months.

Contrarily, the MTBs issued to refill the cash increased to Rs5.34 trillion, increasing by 48% or Rs1.8 trillion in July-September 2018.

In comparison to the short-term debt, Pakistan’s long-term debt fell to Rs7.6 trillion or 3.6%.

The composition of long-term debt in total domestic debt decreased to 42.9% by end of September compared to 45.5% in June 2017.

Contraction was also witnessed in share of bonds issued by the federal government to Rs3 trillion from Rs3.4 trillion previously, despite a rise in public debt.

The data released highlighted that banks were hesitant to lock funds for longer durations as a net reduction of Rs332 billion or one-tenth in bond holdings was seen.

But the debt obtained via sale of prize bonds rose to Rs893.2 billion at end of September 2018 from Rs851 billion.