In a surprising turn of events, the caretaker government of Pakistan has significantly escalated its borrowing spree, tripling the loan amounts and setting a record-breaking pace that surpasses the nation’s 76-year history. This borrowing binge, as reported by Khurram Schehzad, CEO of Alpha Beta Core Securities, reveals an alarming surge in debt creation without adequate attention to the existing financial burdens borne by the country.
Quoting data from the State Bank of Pakistan, Schehzad disclosed that the government’s borrowing from local banks in the first six months of the fiscal year (July 1 to Dec 23) skyrocketed to Rs. 3.12 trillion, marking a staggering 197% increase compared to the same period last year when Rs. 1.05 trillion was borrowed. This unprecedented borrowing pace has already surpassed the total debt accumulated in the entire previous year, reaching Rs. 3.64 trillion.
The caretaker government’s rapid accumulation of debt raises concerns about the country’s economic stability. Schehzad pointed out that if this trend continues in FY24, government borrowing solely from local banks may exceed Rs 6.0 trillion, representing a 65% Year-on-Year increase. This not only establishes a historical record for a caretaker setup but also intensifies Pakistan’s struggle with a mounting debt trap.
The acceleration in government borrowing is particularly perplexing given the reported beating of tax collection targets in the same timeframe. Schehzad emphasized that this aggressive borrowing strategy, coupled with excessive taxation without expanding the tax net, has the potential to trigger inflation and weaken the local currency. The resulting inflationary pressures could further compromise the country’s economic stability, hinder investment, and impede growth prospects.
As concerns grow over the consequences of this Caretaker Government unprecedented borrowing spree, stakeholders closely watch the economic landscape, anticipating the government’s strategies to address the burgeoning debt crisis and its impact on the nation’s financial well-being.
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