As Government announced that it will stop borrowing from State Bank of Pakistan from next Fiscal Year (effective 1st July 2019), however, it has borrowed Rs. 2.7 trillion at the end of 14th-June.
The previous PML-N League Government has borrowed Rs1.43 trillion in the same period last year.
The reason for increased borrowing is lower revenue collection during the fiscal year.
The government has projected in the new budget 2019-20 to increase revenues by Rs1.4 trillion by imposing new taxes/duties and decreasing subsidies.
The government’s retirement of Debt to Commercial banks has increased Three Times to Rs. 859 billion as compared to Rs. 247 billion in the same period last year.
Government to borrow from Commercial Banks
Sources from Banking Sector told The Mint Pk, that as the government is going to limit its borrowing from State Bank from next fiscal year, it is likely to borrow from commercial banks for its funding requirements.
This projected outflow of funds from the Commercial banks to the government is likely to suck up liquidity from the banking sector and will decrease Bank’s appetite for Private Sector Credit. In short, Loans to Private Sector (Corporations, SMEs, Agriculture) is expected to decrease as Government will be the largest borrower from Commercial Banks.