KARACHI: The government borrowed seven times more from banks during the first five months of the current fiscal year while the budgetary borrowing is reaching close to the amount it borrowed during the entire FY23.

The latest data issued by the State Bank of Pakistan (SBP) on Tuesday showed that the government borrowed Rs3.585 trillion from July 1 to Dec 8 FY24 against Rs516bn in the same period last year. Total borrowing in FY23 was Rs3.7tr.

Banks are eagerly parking their maximum liquidity in risk-free papers as the government keeps borrowing aggressively despite higher revenue growth.

In the last auction held on Dec 13, the government received bids worth Rs4.6tr from banks and other corporate investors. The government picked Rs2.6tr out of it.

The government has reportedly decided to slash the Public Sector Development Programme (PSDP) to reduce its expenditure. It looks odd that despite higher revenue collection and record borrowing from banks, the government is planning to slash development spending which is a key element for the growth of the economy.

At the end of November, the Federal Board of Revenue (FBR) said the collection exceeded the targets of the Rs2.68tr and Rs537bn set for the five-month and November, respectively.

The spending by the government has also surged as the cost of every item witnessed a massive hike amid 29pc inflation.

“The government is also facing the heat of record-high inflation and its spending is rising with the increase in the inflation,” said an analyst. However, the higher inflation is also increasing the revenue for the government.

According to the latest data of the SBP, the government borrowed Rs3.1tr for budgetary support during the July 1-Dec 8 period compared to Rs1.1tr in the same period of last year.

According to a Dec 7 report of the state-run Associated Press of Pakistan, the federal government has authorised the utilisation of development funds amounting to Rs302.6bn, out of a total allocation of Rs940bn, for various ongoing and new social sector uplift projects of the federal ministries and divisions during the first five months (July-November) of 2023-24 under PSDP. The utilisation of funds is much less than the expected amount during this period.

Reports in the media suggested that the caretaker government has decided to terminate a total of 137 development projects under the PSDP with a combined value of Rs116bn.

A report of the IMF titled “Pakistan: Technical Assistance Report — Public Investment Management Assessment” has concluded that Pakistan’s PSDP is unaffordable and should be reassessed as Rs10.7tr is the total cost of PSDP projects completion, more than 14 times the budgeted allocation of Rs727bn last fiscal year.

Published in Dawn, December 20th, 2023