The Government’s Borrowing Spree: A Deep Dive into Pakistan’s Economic Situation
Despite a 30% growth in revenue generation, the Pakistani government has borrowed a whopping Rs3.2 trillion from scheduled banks in just over a month. The data from the State Bank of Pakistan highlights the government’s massive spending spree, with borrowing averaging Rs71.8 billion per day.
In a bid to boost revenue, heavy taxation measures have been implemented for the upcoming fiscal year, aiming for a 40% increase in revenue compared to the previous year. However, little effort seems to be made to curb spending to avoid escalating borrowing.
The government’s borrowing from scheduled banks hit a record high of Rs8.564 trillion in the fiscal year 2023-24, double the amount borrowed in the previous year. With domestic debt servicing reaching Rs6.55 trillion, the economy is under strain, further exacerbated by a decline in fixed investments and private sector activities.
Despite the government’s target of 3.5% economic growth for the next fiscal year, challenges like high debt servicing liabilities, elevated interest rates, and a sluggish private sector make achieving this target a daunting task.
Recent treasury bill auctions saw the government raising Rs442 billion, surpassing the target of Rs150 billion. While the cut-off yields saw marginal reductions, the country’s economic challenges remain significant.
With a ballooning debt burden and a sluggish economy, Pakistan’s economic managers face an uphill battle to steer the country towards sustainable growth and stability.