KARACHI: The government borrowed Rs3.2 trillion from scheduled banks from May 15 to June 28 of the fiscal year 2023-24, despite a 30 per cent growth in revenue generation.
The latest State Bank data shows that the government borrowed Rs71.8bn per day during the period, reflecting the government’s massive spending of the government.
In the budget for FY25, the government has resorted to heavy taxation in order to generate 40 per cent more revenue than what it did the previous fiscal year.
Although the government has been hinting at imposing more taxes to increase revenue, there seems to be little effort to curb spending in order to avoid borrowing.
Per day borrowing stood at Rs72bn for the period
Government borrowing from scheduled banks reached a record high of Rs8.564tr during FY24, more than twice the Rs3.716tr it borrowed during FY23.
The borrowing for the last 45 days of FY24 — Rs3.2tr — was incidentally close to the entire borrowing in FY23. These borrowings come at a staggering cost since the interest rate is as high as 22pc.
The data shows that the government borrowed Rs6.55tr for domestic debt servicing during the year.
The government has been exhorting the nation to be ready for more sacrifices in the wake of ongoing talks with the International Monetary Fund (IMF), but has shown reluctance to stop its lavish spending.
The economy is under severe pressure since fixed investments have gone down to a 50-year low. The government slashes the development programme every year while the private sector’s borrowings from banks were negligible due to a whopping 22 per cent interest rate.
All these factors combined to restrict the growth rate to a miserable 2.38pc.
The government has set a 3.5pc growth target for FY25, but a ballooning debt servicing liability, a high interest rate despite low inflation and a slump in economic activities by the private sector is unlikely to allow economic managers to reach the target.
The government raised Rs442 billion against the target of Rs150bn through the auction of treasury bills on Wednesday.
The cut-off yields on the papers were reduced by 10 basis points for three months to 20.04 per cent and 18 basis points to 19.78pc for six-month T-bills. The rate on 12-month papers was kept unchanged at 18.54pc.
The government raised Rs74.6bn for three-month, Rs158.3bn for six-month and Rs121.4bn for 12-month papers. An amount of Rs87.4bn was raised through a non-bidding process.
Published in Dawn, July 11th, 2024
