KARACHI: A large part of net borrowing from commercial banks results in increasing domestic debt, especially when the government does not borrow from the central bank under the International Monetary Fund programme. The domestic debt stood at Rs27.4 trillion by the end of January. It stood at Rs26.2 trillion as of June last year. External debt was Rs14.9 trillion in January, and it amounted to Rs12.4 trillion in June.
Rise in net borrowing to meet expenditures and the accumulation of the foreign currency reserves increased the funding needs of the government.
The government’s borrowing requirements remained on the upward trend due to the spending related to the coronavirus pandemic. Lower growth in non-tax revenue also contributes to the rise in the government’s borrowing needs.
The SBP’s data showed that long-term debt rose to Rs21.6 trillion at the end of January, compared with Rs19.5 trillion in June. The short-term debt was Rs537 trillion, compared with Rs6.6 trillion by the end of January.
The government plans to raise Rs4 trillion through the auction of market treasury bills in the March-May period to finance the budget deficit, according to the auction calendar issued by the SBP on the same day.
The government is also set to fetch Rs900 billion from the sale of Pakistan Investment Bonds and Rs300 billion through the auction of variable and fixed rental rates Ijara Sukuk in the period under review.
At around two percent of GDP, the fiscal deficit during the first half of FY2022 was almost the same as last year.
Federal Board of Revenue (FBR) tax collections grew strongly by 30 percent year-on-year during July-February FY2022, in part due to a depreciated exchange rate and higher imports than last year as well as strengthened tax collection efforts, the SBP said in its March monetary policy statement. This offsets declines in non-tax revenues due to lower petroleum development levy revenues and increased spending, including on subsidies, grants and provincial Public Sector Development Programme, it said.
While the primary balance posted a surplus of 0.1 percent of GDP in the first half of FY22, it was lower than the surplus of 0.6 percent of GDP in the same period last year, it added.