Govt borrows record Rs760bn from banks in July-August

The federal government has borrowed record money, over Rs760 billion, from scheduled banks during the first two months of the current fiscal year (FY23). The latest data of the State Bank of Pakistan shows not only the increasing dependence of the government on banks’ money but that the cost of borrowing is also very high. The federal government borrowed Rs760.4bn during July-Aug FY23 from banks, compared to Rs76.4bn in the same period of FY22. However, the government has been borrowing at a very high rate from banks during FY23. The latest auction of treasury bills showed that the government borrowed at 15.99 per cent for three months; almost 1pc more than the policy interest rate. The two months’ main inflation is more than 27pc indicating that the SBP may opt for a further increase in the interest rate to counter the inflation. A further increase in interest rates means costlier borrowing for the government from banks.