Govt’s bank borrowings surge 182pc to Rs3tr

Banks’ lending to the federal government surged by 182 per cent while lending to the private sector fell by 83pc in first nine months of the current fiscal year. The State Bank of Pakistan (SBP) data showed that banks were keen to invest in government papers instead of lending to the private sector. While it reflects the government’s growing need for liquidity due to a shortfall in revenue collection, it also showed the increased risks involved in lending to the private sector due to unprecedentedly high-interest rates. According to SBP, the lending to the federal government swelled to Rs2,940 billion from July to April 7 FY23 against Rs1,043bn in the same period of last year, showing an increase of 182pc. This huge increase in the government’s borrowing from banks was largely due to higher spending and poor revenue collection. The revenue shortage was due to low duty collection since the imports have been drastically curtailed to save the foreign exchange reserves needed to make payments for debt servicing. Even high inflation, which hit a historic level above 35pc in March, could not boost the revenue collection through sales tax. The first nine months’ shortfall in revenue reached Rs278bn as total collection stood at Rs5.155 trillion against the target of Rs5.433tr.