Record
KARACHI: The caretaker government, led by Prime Minister Anwaarul Haq Kakar, has marked an unprecedented move by borrowing nearly Rs4 trillion from banks, setting a record. This borrowing, which surpasses the total for the entire fiscal year 2022-23, has raised concerns about the economic impact.
Data from the State Bank of Pakistan reveals that from July 1 to Jan 19, 2023-24, the government borrowed Rs3.99 trillion, indicating a 185% increase compared to the same period the previous year (Rs1.398 trillion). Despite surpassing revenue collection targets in the first six months, the government’s desperate borrowing is attributed to the surging expenses exacerbated by an average inflation rate of over 28% in the first seven months of the fiscal year.
The costly borrowing, with returns at about 21%, is considered a burden on the economy, particularly when more than 50% of the budget is allocated for debt servicing. The high-cost borrowing has proved advantageous for banks, with many doubling their profits in the calendar year 2023.
Analysts express concern over the sustainability of such borrowing patterns, emphasizing the impact on the economy already grappling with substantial domestic and foreign debts.
Additionally, the pressure to address circular debts in the power sector, reaching Rs5.7 trillion, adds strain to the fiscal situation. As Pakistan approaches general elections on Feb 8, political uncertainties loom, affecting investor confidence and potentially hindering economic growth.
The prevailing high-cost money, with a base rate of 22%, raises skepticism about the feasibility of making ventures profitable. Despite efforts by the caretaker government, challenges persist, and the economic outlook remains uncertain, casting shadows on the country’s future growth prospects.
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