Govt Borrows Rs. 575 Billion From Banks & Financial Institutions

Government is borrowing funds from commercial banks and financial institutions, recording an increase of Rs 574 billion in borrowing over the first quarter of 2017. The funds have been mainly earmarked for meeting development and security expenditures.

According to statistics released by State Bank of Pakistan, the overall borrowing of government from banks and financial institutions grew to Rs 8.620 trillion by March 2017. It stood at Rs 8.045 trillion at December 2016, showing a 7 percent growth over the last quarter.

Government’s borrowings from scheduled banks increased to Rs 6.950 trillion by March 2017 from Rs 6.477 trillion stood by December 2016.

Its borrowing from financial institutions, corporates and funds increased to Rs 1.669 trillion by March 2017 from R 1.568 trillion by December 2016.

The government borrowed this amount mainly from Pakistan Investment Bonds (PIBS) and Market Treasury Bills (MTBs). These are the papers from which the commercial banks usually invest their money, giving loans to a single big borrower i.e. the government in order to earn easy and secure margins.

The government expenditures increased for development and security purposes. On the other hand, its revenues from tax and no-taxes sources were not sufficient. Nor were they efficiently used as originally planned. Therefore, the fiscal deficit is ballooning.

Due to higher security-related spending to further improve the overall law and order situation in the country, the trends in current expenditure were observed in the first six months of the current financial year. The same trend is expected to continue in the closing third quarter.

SBP’s Observations

It must be acknowledged that the slowdown in tax revenue collection is partly due to several tax incentives announced to promote investment and boost economic activity in the country. This includes the reduction in the corporate tax rate. Besides, in the wake of recently announced incentives – especially the export package and the tax exemptions for some CPEC-related projects – accelerating revenue collection during the remaining part of FY17 may also be challenging.

Besides borrowing from the local banks and financial institutions, the government also borrowed millions of dollars from foreign and development banks for building mega projects.



Get Alerts

Follow ProPakistani to get latest news and updates.


ProPakistani Community

Join the groups below to get latest news and updates.



>