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Pakistan Government Borrows Record Rs5.5 Trillion from Banks Amid Rising Inflation
(CTN News) – Dawn reported on Saturday that the Pakistan government borrowed around PKR 650 billion from banks to cover rising expenses within a week.
According to SBP data, the government borrowed PKR 5.5 trillion from commercial banks from July 1, 2023, to April 5, 2024, up from PKR 2.95 billion in the previous fiscal year.
Extensive borrowing significantly burdens the economy, as domestic loans limit revenue allocation to interest payments. According to Dawn, the government plans to spend more than half the budget on interest payments.
In fiscal year 2023, the government borrowed PKR 3.7 trillion from banks. However, the current situation is concerning, as the government has exceeded the previous year’s budget by PKR 1.784 trillion in the first nine months.
Pakistan Seeks External Support Amid Borrowing Challenges
The government often borrows substantially from banks in the latter quarter of a fiscal year to show a more positive economic performance.
According to the Pakistan-based news daily, the economy is suffering serious internal and external challenges.
The majority of revenue earned is used to service domestic debt and interest. This considerable outflow prevents the government from launching new development programs; instead, a large share of development funds are shifted to other sectors.
The situation is more serious on the exterior front, where borrowing is difficult due to Pakistan’s limited repayment capabilities. Pakistan needs support from the IMF to improve its reputation among global investors. However, the government has encountered difficulties borrowing from overseas markets over the last two years.
According to financial experts, the new agreement with the IMF may ‘create a window for Pakistan to borrow from the international market.’ They also underline that “time is required to sustain growth and eliminate major reasons for uncertainty.”
According to analyst projections, current bank borrowing could reach PKR 7 trillion by the end of June 2024. Dawn states that ‘the government has been increasing energy costs but has not generated enough income to pay its expenses.’