Govt Plans to Borrow Rs. 32 Trillion This Fiscal Year

The federal government has unveiled a bold plan to borrow Rs. 32 trillion during the fiscal year 2024-25 to finance its budget deficit of Rs. 8.5 trillion, and Rs. 23.4 trillion in maturing debt which authorities expect will get rolled over. Finance Ministry sources said the government will borrow 92 percent of the Rs. 8.5 trillion locally. They said papers like Pakistan Investment Bonds, Ijara Sukuk, and Market Treasury Bills with short-term maturities of 3, 6, and 12 months will not be used to raise this amount. This plan relies heavily on the timely approval of the new bailout program by the International Monetary Fund (IMF) and continued financial support from China, which is expected to roll over nearly $7.9 billion in debt. The Ministry of Finance’s plan excludes Rs. 2.6 trillion is needed by the State Bank of Pakistan to settle debts with the UAE, China, and the IMF. The gross financing needs currently stand at 26 percent of GDP, reflecting a growing dependence on debt rollovers where $4 billion in cash deposits and $3.9 billion in foreign loans are due this year. The government has decided against borrowing from the central bank this fiscal year but won’t back down from international loans. Sources said it plans on borrowing $400 million from the Asian Development Bank (ADB) under the Climate and Disaster Resilience Program, and $100 million from the ADB’s Women Inclusive Finance Program. A $30 million loan will be obtained under the Domestic Resource Mobilization Program. The plan also includes issuing $1 billion in Panda Bonds and Green Bonds, with additional commercial debt of $1.2 billion also on the cards. The success of this borrowing strategy is uncertain, especially as the IMF has yet to disburse its newest bailout cash to the South Asian economy.