ISLAMABAD: The government has borrowed a staggering Rs3.2 trillion from scheduled banks between May 15 and June 28 of the fiscal year 2023-24, averaging Rs71.8 billion per day, according to recent State Bank data. Despite a notable 30% increase in revenue generation, the borrowing reflects the government’s substantial spending spree.
This borrowing surge is part of broader fiscal strategies outlined in the FY25 budget, which emphasizes heavy taxation to boost revenue by 40% compared to the previous fiscal year. However, there appears to be minimal effort to curtail expenditures, contributing to continued reliance on borrowing.
During the fiscal year 2023-24, total government borrowing from scheduled banks reached an unprecedented Rs8.564 trillion, more than double the Rs3.716 trillion borrowed in the previous fiscal year. The borrowing of Rs3.2 trillion in the final 45 days of FY24 alone nearly matches the entire borrowing of FY23. Notably, these loans come at a significant cost, with interest rates as high as 22%.
Despite ongoing discussions with the International Monetary Fund (IMF) and calls for national sacrifices, the government’s lavish spending practices have persisted. This fiscal stance occurs amidst a challenging economic backdrop, marked by a 50-year low in fixed investments and minimal private sector borrowing due to steep interest rates.
With a modest growth rate of 2.38% and ambitious targets set for FY25, economic managers face daunting challenges, including a burgeoning debt servicing burden and economic slowdown exacerbated by high interest rates despite low inflation rates.
In a recent treasury bill auction, the government raised Rs442 billion, exceeding the target of Rs150 billion. The auction featured slight reductions in cut-off yields, indicating some adjustments in the government’s borrowing strategy amid fiscal pressures.
