The government plans to borrow a record Rs 10.36 trillion through treasury bills and bonds between June and August to cover the budget deficit amid low revenue collection and drying up of foreign exchange.
Most planned borrowings for three months will be through market treasury bills (T-bills) with maturities of three, six and 12 months. According to the auction calendar released by the central bank on Thursday, the government will raise Rs 8.70 trillion through short-term paper auctions.
The sale of Pakistan Investment Bonds (PIBs) with fixed and floating rates will raise a debt of Rs 1.66 trillion to the government. Due to insufficient inflow of external credit, the Center was forced to borrow significantly from domestic banks to meet its growing financing demands. Months passed with no progress on the bailout package from the International Monetary Fund (IMF).
As a result of lower revenue and higher expenditure requirements, the government was forced to take on more domestic debt. At the end of April, Pakistan’s public debt reached Rs 58.6 trillion, which was Rs 43.705 trillion in the same period last year. The largest share of the country’s total debt is the domestic debt, which is 43 percent of the gross domestic product.
At the end of April 2023, household debt rose 26.4 percent year-on-year to Rs 36.549 trillion. During the 10 months of the current financial year, domestic debt increased by 17.57 percent.
The budget deficit fell to 4.6 percent of GDP in the first 10 months of the current financial year from 4.9 percent a year ago. The primary balance has returned to a surplus of Rs 99.1 billion in July-April FY23 from a deficit of Rs 890.2 billion in July-April FY22.
Tax revenues rose 17 percent year-on-year to Rs 5.6 trillion in July-March FY23 despite a decline in imports due to the imposition of new taxes and increased administrative measures.
Analysts expect the budget deficit to reach 6.3 percent of GDP in the current fiscal year, up from 7.9 percent a year ago. There is another reason for the increasing borrowing needs of the government. The ruling party’s final budget before the elections is expected to increase the overall public sector development plan and current expenditure by 111 percent and 15 percent year-on-year.
The budget for the financial year 2023-2024 will be released on June 9 (today). Ahead of elections, this increase in spending seeks to garner public support while promoting economic growth and addressing key socioeconomic issues.
