Govt borrowing from banks surges to Rs2.7 trillion

After retiring Rs1.5 trillion in debt during the first half of the current fiscal year (FY25), the government has significantly increased its borrowing from commercial banks, reaching Rs2.7tr by early May. From July to the end of December FY25, the government retired Rs1.541tr from commercial banks, reflecting a cautious approach to keep the fiscal gap within the IMF’s prescribed range in order to continue receiving further assistance from the donor agency. This debt retirement contrasted sharply with the previous year’s trend, when the government recorded a net borrowing of Rs3.744tr during the same period. The retirement marked a new trend, as the government had been a consistent net borrower for many years. One of the major reasons for the debt retirement in the first half was the additional supply of massive liquidity — amounting to Rs2.7tr — from the State Bank as profits.