Karachi, January 14, 2025 – The government has retired a substantial Rs 2.42 trillion in bank borrowing during the first half of the fiscal year 2024-25 (July–December). The data, released by the State Bank of Pakistan (SBP) on Tuesday, highlights the government’s efforts to manage and reduce its reliance on borrowing.
The SBP stated that the federal government achieved a major milestone in retiring banking loans during the period from July 1, 2024, to January 3, 2025. This repayment includes debts owed to both the SBP and commercial banks, signaling a focused approach to curtailing outstanding borrowing obligations.
Decline in Borrowing Compared to Last Year
The SBP data revealed a 190% reduction in the government’s debt obligations compared to the corresponding period last year. During the same timeframe in FY24, the government had borrowed Rs 2.70 trillion. The drastic decline in borrowing reflects a strategic shift in fiscal management.
Breakdown of Debt Retirement
• State Bank of Pakistan: The government retired Rs 733 billion to the SBP during the first half of FY25, a slight decrease from Rs 753 billion repaid during the same period last fiscal year.
• Commercial Banks: A significant reduction was seen in borrowing from commercial banks. The government repaid Rs 1.68 trillion in July–December FY25, compared to Rs 3.65 trillion borrowed during the same period in FY24.
Implications of Reduced Borrowing
The substantial retirement of borrowing is expected to reduce the federal government’s debt servicing burden, freeing up resources for other critical expenditures. Additionally, this move may enhance fiscal discipline, strengthen investor confidence, and stabilize the financial sector by reducing reliance on bank loans.
The reduction in borrowing also aligns with broader efforts to meet fiscal targets and improve the country’s economic outlook. By repaying debts to both the SBP and commercial banks, the government aims to create a more sustainable fiscal environment.
As borrowing continues to be a focal point in fiscal policy, these repayments mark a positive step toward reducing the debt burden and maintaining financial stability in the long term.