Karachi, September 13, 2023 – Government borrowing from banks has seen a substantial surge of 72 percent during the initial two months of the fiscal year 2023-24, as revealed by official data released on Tuesday.
Statistics published by the State Bank of Pakistan (SBP) indicate that borrowing for budget financing increased significantly, reaching Rs 1.49 trillion in July and August of the current fiscal year. This is a stark contrast to the Rs 867 billion borrowed during the same period in the previous fiscal year.
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Typically, the government acquires loans from banks through the issuance of market treasury bills (MTBs) and Pakistan Investment Bonds (PIBs). Additionally, Ijara Sukuk serves as another instrument for sharia-compliant borrowing by the government.
It’s worth noting that the government’s reliance on borrowing from the central bank has significantly diminished due to conditions imposed under the International Monetary Fund (IMF) program.
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During the first two months of the current fiscal year, the government repaid approximately Rs 714 billion to the SBP, compared to loan repayments totaling Rs 580 billion during the corresponding months of the previous fiscal year.
The increased government borrowing, coupled with challenging economic conditions, has had adverse effects on private sector credit off-take during this period. Businesses have opted to retire their outstanding loans, amounting to Rs 223 billion in July and August 2023, compared to loan repayments totaling Rs 116 billion during the same period last year.
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This data reflects the dynamic interplay between government borrowing, economic conditions, and private sector credit activities, highlighting the need for a balanced approach to ensure sustained economic stability and growth.
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