Karachi, September 11, 2024 – In a striking development, the federal government’s borrowing from scheduled banks for budgetary support nosedived by 58 percent during the first two months of fiscal year 2025 (FY25), signaling a significant shift in fiscal management compared to the same period last year.
Data released by the State Bank of Pakistan (SBP) reveals that the federal government secured Rs 660.3 billion from scheduled banks between July 1 and August 30, 2024. This figure marks a dramatic reduction from the Rs 1.584 trillion borrowed during the corresponding period in FY24, illustrating a staggering decline of Rs 924.3 billion.
In addition to this notable reduction, the federal government made repayments of Rs 176.6 billion to the SBP in the first two months of FY25, a sharp contrast to the Rs 714 billion repaid in the same period of FY24. Overall, net government sector borrowing, encompassing both budgetary support and commodity financing, plunged by 27 percent, translating to a reduction of Rs 248.153 billion.
For the review period spanning July to August FY25, federal and provincial governments collectively raised Rs 681 billion for budgetary support, commodity financing, and related purposes. This represents a dip from the Rs 929 billion generated during the same timeframe of the previous fiscal year.
Financial analysts attribute this substantial decline in borrowing to an uptick in foreign inflows and more robust revenue collection, which have mitigated the government’s immediate need for budgetary assistance. However, experts caution that borrowing could potentially escalate later in the fiscal year as financial pressures mount.
On the provincial front, fiscal activity varied significantly. The Balochistan government repaid Rs 23.4 billion to the SBP, while Khyber Pakhtunkhwa settled Rs 30 billion in debts. Meanwhile, the Sindh government borrowed Rs 5 billion, and Punjab took out a substantial Rs 294 billion from the central bank during the review period.
In a related development, the SBP on Tuesday issued auction calendars for short- and long-term government securities, reflecting anticipated borrowing requirements. Over the next three months (September-November), the federal government aims to raise Rs 6.295 trillion through the sale of government instruments. Of this, Rs 3.475 trillion will be sourced through 3-month, 6-month, and 12-month Market Treasury Bills (MTBs), while Rs 2.820 trillion will be borrowed via long-term Pakistan Investment Bonds (PIBs).
Despite the early plunge in borrowing for FY25, the government’s fiscal needs remain formidable, with expectations of increased borrowing in the months ahead to meet ongoing financial commitments.
