Debt dilemma: Pakistan’s high bank borrowings defy revenue success

ISLAMABAD: In a disconcerting development, the government of Pakistan’s borrowings from banks have witnessed a troubling upward trend, raising alarms about the country’s deepening debt situation and casting shadows over its poised positive economic outlook.

Recent data for the six months till December 2023 (6MFY24) reveals a staggering spike in borrowing through banks, reaching Rs3.214 trillion compared to Rs1.019 trillion recorded during the same period last year.

This marks a massive surge of 3.15 times, highlighting an alarming escalation in borrowing levels through this channel.

It is imperative to note that the country is currently under the governance of a caretaker setup.

Shockingly, within six months, the government has accumulated a level of debt equivalent to that of the entire fiscal year 2023, raising concerns about fiscal responsibility.

Governments often resort to borrowing from banks to bridge revenue-expense gaps, refinance existing debt, rebuild reserves, and fund public sector projects.

Despite the Federal Board of Revenue’s (FBR) commendable performance in tax collections, the government has turned significantly to banks for additional funds.

In a historic achievement, the FBR collected over Rs1 trillion in December, surpassing the set target of Rs4.425 trillion for 6MFY24 with a total collection of Rs4.468 trillion.

This unexpected reliance on bank borrowing, despite robust tax collection, adds a layer of complexity to the economic narrative.

Economic concerns intensify as these borrowing figures seem to contradict the government’s goal of optimising the allocation and expenditure of public funds.

The caretaker government authorised the utilisation of only Rs300.904 billion out of a total allocation of Rs950 billion for various social sector uplift projects during the first four months of FY24, suggesting a potential imbalance in fiscal planning.

Simultaneously, the high borrowing figures point towards the possibility of a rising Public Sector Development Programme, further complicating the economic landscape of the country.

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