Govt's debt increases by Rs537 billion in July

Amidst a revenue shortfall and insufficient reserves held by the State Bank of Pakistan, the federal government's domestic debt increased by 537 billion in July.

Commerce experts believed that borrowing would be necessary to bridge the revenue shortfall gap from the first day of 2024-25.

The country is stranded in double debt, as the foreign and domestic debt servicing consumed almost all tax revenue, forcing the government to rely on borrowing to survive.

The details depicted that the country’s total debt rose by Rs690 billion to Rs69.604 trillion by the end of July compared to Rs68.914 in June.

The government has decided to borrow an estimated Rs9.3 trillion in FY2024-25 to shrink the gap between revenue and expenditure. 

Centre had borrowed a record Rs8.4 trillion from domestic banks in FY24 for budget support to finance and control fiscal deficit, meanwhile, the loan was taken at 22 per interest rate, which overburdened the economy.

The latest data from the SBP issued on Thursday showed that the government borrowed Rs47.697 trillion by the end of July, comparing Rs47.160 trillion in June.

Currently, the country's domestic debt burden has risen to Rs537 billion. 

A policy rate of 2.5 percent declined during the last couple of months. A further cut of 150bps is anticipated in SBP’s Monetary Policy Committee meeting on Sep 12. 

The decline in the interest rate would reduce the cost of borrowing trillions of rupees from the banks.