The government’s borrowing from multiple financial sources has doubled during the first five months of the ongoing fiscal year.
According to figures issued by the State Bank of Pakistan (SBP), the government’s borrowing for budgetary support increased by 108 percent to Rs. 104 billion in the first five months of the current fiscal year to control the widening fiscal deficit.
During the same period of the previous financial year, the government borrowed Rs. 50 billion, but the fiscal deficit remained high at 7.5 percent of the total GDP, or Rs. 3.41 trillion, by year-end. Although various macro indicators paint a bleak picture as far as the economy is concerned, the fiscal deficit for FY22 is expected to be 6.8 percent of the total GDP.
So far, the government has acquired the majority of its liquidity from conventional sources such as Treasury Bills (T-bills) and Pakistan Investment Bonds (PIBs), while net outflows from National Savings Schemes (NSS) have decreased the government’s ability to borrow more money.
Due to a lack of institutional investments, the NSS has shown a net outflow for the past two years. To keep the financial market liquid for private sector breakthroughs, the government has prohibited institutional investments in the NSS. Since the end of June, the central government has borrowed Rs. 1,580 billion, bringing the overall debt to Rs. 40.279 trillion.
Notably, the fiscal deficit for FY22 was initially expected to be around Rs. 3.99 trillion in the budget. The funds were fundamentally tied up through net external financing of Rs. 1.246 trillion, net domestic financing of Rs. 2.492 trillion, and privatization revenues amounting to Rs. 252 billion.
Besides the above, the State Bank of Pakistan witnessed huge inflows of $3 billion from the Kingdom of Saudi Arabia as part of the financial assistance program. The country’s reserves surged to $25.1 billion by the week ending 3 December 2021.
During the week, the external debt and other official payments were made through the reserves of the central bank, essentially reflecting the net addition of $2.648 billion to stand at $18.658 billion.
