Govt borrowing soars to Rs5.736trn in 9MFY24

The government borrowed Rs5.736 trillion from banks in the first nine months (July-March) of the current fiscal year 2023-24, which represents a significant increase compared to previous years. 

This borrowing accounted for 76% of the tax revenue during the same period, according to the latest data from the State Bank.

The State Bank’s report indicates that both the current government and the previous caretaker government contributed to this substantial level of borrowing, despite high borrowing costs. 

As of April 30, the average yields for treasury bills for three, six, and 12 months stood at 21%, highlighting the expensive nature of these borrowings and the potential debt trap scenario where borrowing primarily covers interest payments.

During this fiscal year, the markup payments made by the government equaled 76% of the tax revenue, with Rs5.517 trillion paid as interest on previous borrowings. 

The data also shows a stark increase in interest payments in FY23, totaling Rs5.935 trillion, a significant rise from Rs3.331 trillion in FY22. 

Consequently, GDP in FY23 expanded to Rs84.657 trillion from Rs66.623 trillion in FY22.

Looking ahead to FY24, the government is expected to spend approximately Rs7.3 trillion on debt servicing, which is over half of the total budget of Rs14.46 trillion. 

Despite retiring Rs329.3 billion in net debt this year, the government still requires substantial funds for commodity operations. This comes after no borrowings were made for wheat procurement in Sindh and Punjab, leading to a price crash.