In breach of law, govt borrows Rs239bn from State Bank: think tank

In an apparent deviation from the law, the State Bank of Pakistan (SBP) is reported to have extended Rs239 billion credit to the PMLN-led coalition government in January-February to meet ballooning debt servicing requirements of the domestic commercial banks. Under the State Bank of Pakistan Act amended in 2022 on the dictation of the International Monetary Fund (IMF), government borrowing from the central bank is prohibited. Section 9C of the law says: “Prohibition on the Government borrowing.—(1) The Bank shall not extend any direct credits to or guarantee any obligations of the Government, or any government-owned entity or any other public entity”. An Islamabad-based economic think tank — Prime Institute (PI) — in its latest quarterly report said the government had borrowed Rs239bn from the SBP in January and February of this year as the country’s fiscal deficit overshoot amid excessive debt servicing cost of the domestic debt. It said an excessive government footprint in the economy and public spending continued to fuel the economic crisis.