Government starts retiring State Bank of Pakistan Loans

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Government starts retiring State Bank of Pakistan Loans

In a recent fiscal management move, Government has retired Rs. 1.285 trillion previously borrowed from State Bank of Pakistan. The Reserve Money statement as at 26th July issued by SBP shows Government retiring Central Bank Loan. However, the government has borrowed an additional Rs. 1.128 trillion from Commercial Banks in the same period.

Previously, the Government has agreed with the IMF that it will stop borrowing from State Bank of Pakistan as it leads to an increase in Inflation. Resultantly, we are seeing the retirement of the said loan as pressure from IMF is imminent.

However, the retirement of SBP borrowing is just bookish adjustments as Government has borrowed from Commercial Banks and used that proceeds to retire SBP loans. Government has borrowed from Commercial Banks via PIB and T-Bills Auction. A collective amount of Rs. 1.218 trillion was raised which is directed towards SBP for repayment of SBP Loans.

Another visible change is the retirement of Private sector credit which saw net retirement of Rs. 115 billion in the month of July. The main reason could be seasonal retirement, however, high-Interest Rate is also causing Businesses to retire costly borrowings

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