Under the leadership of Prime Minister Anwaarul Haq Kakar, Pakistan’s interim administration has seen a notable uptick in bank borrowing. Between July 1, 2023, and January 19, 2024, the government borrowed nearly Rs4 trillion, a stark rise compared to the same period in the prior fiscal year.
This surge signifies a significant 185% increase from the preceding fiscal year, during which the government borrowed Rs1.398 trillion, as per data from the State Bank of Pakistan. Despite meeting revenue collection targets for the first six months, concerns have arisen regarding the economic ramifications of this borrowing spree.
Pakistan is currently grappling with challenges such as inflation, sluggish economic growth, and the imperative to tackle circular debts in the power sector. The borrowing strategy, yielding returns around 21%, is proving to be a costly venture for the interim government, consuming over half of the budget allocated solely for debt servicing.
Financial analysts have criticized this approach, citing it as a major economic hurdle. Although banking institutions reported doubled profits in 2023, the trend of escalating borrowing in recent fiscal years is unlikely to reverse in the foreseeable future.
With general elections slated for February 8 and the impending formation of a new government, political uncertainties may further dampen investment prospects, prolonging economic trials for Pakistan.