The federal and provincial governments have collectively repaid over Rs2 trillion in budgetary borrowings during the first five months of the current fiscal year (FY25).
The repayment has been bolstered by a Rs3 trillion profit transfer from the State Bank of Pakistan (SBP) to the federal government, creating a financial cushion for debt reduction.
According to data from the SBP, the combined borrowing from scheduled banks by the federal and provincial governments for budgetary support declined sharply, with Rs2.018 trillion retired between July and November FY25, compared to Rs2.89 trillion in the same period last fiscal year.
The federal government led the repayment efforts, retiring Rs1.575 trillion to scheduled banks in the five-month period, compared to Rs3.4 trillion borrowed during the same timeframe in FY24. However, it borrowed Rs31.6 billion from the SBP during this period, contrasting with a repayment of Rs450 billion to the central bank in FY24.
Provincial governments collectively retired Rs449 billion, including Rs351 billion to the SBP and Rs98 billion to scheduled banks. Among provinces, Khyber Pakhtunkhwa repaid Rs110 billion to the SBP, Sindh Rs106 billion, Punjab Rs99 billion, and Balochistan Rs35 billion.
Private sector borrowing surged, with credit rising by Rs1.148 trillion during July-November FY25, a sharp contrast to a repayment of Rs33.2 billion in the same period last year. This increase is attributed to banks aggressively extending credit to meet the government-mandated 50% Advance to Deposit Ratio (ADR) and avoid additional taxes.
Meanwhile, the SBP announced auction calendars for short-term and long-term government securities to raise Rs7.6 trillion for the federal government between December 2024 and February 2025. This includes Rs3.8 trillion through Market Treasury Bills (MTBs) and Rs3.8 trillion via Pakistan Investment Bonds (PIBs).
