The Fiscal Deficit marred government of Pakistan has announced that it will borrow a record Rs9.44 trillion from local banks over the next three months. The funds will be used to repay maturing debt and finance expenditures.
According to the State Bank of Pakistan (SBP), the government will acquire Rs8.05 trillion to repay old debt. This will add a net Rs1.38 trillion to the total domestic public debt over three months.
The government has been facing a severe cash crunch due to a number of factors, including a widening current account deficit, falling foreign exchange reserves, and rising inflation. The borrowing spree is likely to further add to the country’s debt burden, which is already at unsustainable levels.
The government has said that it will take steps to reduce the fiscal deficit and improve the current account balance. However, it is unclear whether these measures will be enough to avert a balance of payments crisis.
The borrowing spree is likely to have a negative impact on the economy. It will crowd out private investment and lead to higher interest rates. This will further dampen economic growth.
The government needs to take urgent steps to address the fiscal and external imbalances. Otherwise, the country could face a severe economic crisis.
Of the total amount, Rs7.50 trillion will be raised through the sale of three- to 12-month treasury bills (T-bills). Another Rs1.49 trillion will be raised through the auction of two-year to 30-year Pakistan Investment Bonds (PIBs) at fixed and floating rates. Finally, Rs450 billion will be raised by selling Sukuk to Shariah-compliant banks.
The government is scheduled to pay Rs7.08 trillion for the maturing T-bills mainly in installments around June 2023. It also has to pay off Rs647 billion for the maturing long-term PIBs in May to July.
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