Between July 1, 2023, and June 14, 2024, the government borrowed Rs7.766 trillion from banks, marking a 77.52% increase over the same period last year, according to central bank data released on Wednesday.
This significant reliance on bank borrowings was driven by a large budget deficit, the need to repay maturing debt, and rising interest costs. Typically, the government spends more than it collects in taxes, necessitating borrowing to fill the gap. However, this borrowed money must be repaid with interest, which has reached a record high
On June 10, the State Bank of Pakistan reduced its key interest rate by 150 basis points to 20.5%. This reduction followed a year of maintaining rates at a historically high 22% to combat inflation.
“Government borrowing increased to fund growing budgetary requirements and the retirement of SBP debt to meet IMF requirements,” explained Awais Ashraf, Director of Research at AKD Securities Limited.
