Prohibition of borrowing from T-bills and Pakistan Investment Bonds in the IMF program. Photo: File
Karachi: The government has decided to take an additional loan of Rs 1.5 trillion during the three months of March to May 2023 to pay the monthly salaries of the employees of the loss-making government institutions and to meet other expenses besides paying the interest on the already taken loans. Is.
The government has set a total borrowing target of seven trillion rupees, a major part of these loans ie 5.5 trillion rupees will be repaid as interest on earlier loans taken from financial institutions.
According to Tahir Abbas, Head of Research at Arif Habib Limited, the internal debt burden on the government of Pakistan is increasing due to the delay in the restoration of the IMF loan program. The largest portion of government expenditure is now interest payments on loans.
Two weeks ago, Moody’s said in its report that Pakistan will spend more than half of its income in the fiscal year 2023 on interest payments alone.
State Bank has increased the policy rate by 300 basis points to 20% in March, which has made it difficult for the government to borrow more from commercial banks. So far this year, the government has taken the largest amount of loans from commercial banks. Apart from the country’s defense expenditure, subsidies and social expenditure have also taken a big hit.
Alpha Beta Core Head of Research Khurram Shahzad said after the recent devaluation of the rupee, the volume of external debt has increased without any new borrowing. A 10-rupee decrease in the value of domestic currency against the dollar increases the country’s debt burden by 1.3 trillion rupees. Thus, from July 2022 to January 2023, the debt has increased by 55 trillion rupees.
The government of Pakistan will now get new loans from commercial banks through the sale of T-bills and Pakistan Investment Bonds (PIBs). But the IMF has banned such loans to revive its $6.5 billion loan program. It has increased its income but despite the heavy cut in the public sector development program, the budget expenditure is not being controlled.
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