Govt Borrowing From Banks Hits Record High in Just 7 Months

The federal government has borrowed nearly Rs. 4 trillion from banks despite collecting more revenue than expected so far during the financial year 2023-24. As per official data from the State Bank of Pakistan (SBP), the government has borrowed Rs. 3.99 trillion (cash basis) from the local banking sector during the first seven months i.e. July 1, 2023, till January 19, 2024, a staggering 185 percent leap from Rs. 1.398 billion debt raised during the same period last year. Meanwhile, the government has paid back Rs. 1.27 trillion net loan to SBP during the period in review. It is pertinent to mention here that the government can’t borrow directly from the central bank under the mandatory condition of the International Monetary Fund. The borrowing from scheduled banks in the current fiscal year has already surpassed the Rs. 3.7 trillion debt raised in the entire FY23. Overall, net government sector borrowing for budgetary support totaled Rs. 3.74 trillion in the entire FY23 against Rs. 3.13 trillion in FY22. The net borrowing of the federal government to meet its financial requirements for running state affairs stood at Rs. 2.42 trillion in the period from July 2023 to January 19, 2024. The economy may see a massive spike in borrowings at the end of FY24 on June 30, as the current sum has already surpassed the total amount borrowed by the previous federal government in FY23. Meanwhile, financing from Islamic banks declined by 83 percent YoY from Rs. 424 billion last year to Rs. 72.3 billion this year. Islamic banking branches of conventional banks provided credit to the tune of Rs. 27.8 billion during the period in review compared to a negative impact of Rs. 453 billion in SPLY.