Govt borrowings from banks surge to Rs1.8tr

The government's borrowing from banks in Pakistan has surged to Rs1.8 trillion in recent years, causing concerns among experts and analysts. The trend has raised questions about the government's fiscal management and its impact on the country's economy.

One of the reasons for the increase in borrowing is the government's failure to generate sufficient revenue to meet its expenditures. Pakistan has been struggling with a low tax-to-GDP ratio for many years, which has resulted in a widening fiscal deficit. The government has been borrowing from banks to cover the shortfall, but this has led to a growing debt burden.

The borrowing trend has also put pressure on the banking sector, which is already facing challenges due to a high rate of non-performing loans (NPLs). The surge in government borrowing has led to a shortage of credit for private sector borrowers, as banks have allocated a significant portion of their resources to the government.

Another issue with the government's borrowing from banks is the high cost of financing. The government has been borrowing at high interest rates, which has increased the cost of debt servicing. This, in turn, has put additional strain on the government's finances, as a larger portion of its budget is being allocated to debt servicing rather than development and social welfare programs.

Experts have also raised concerns about the long-term impact of the government's borrowing on the country's economy. The high level of debt could result in a lower credit rating for Pakistan, which would make it more difficult for the government to borrow in the future. This could also lead to a higher cost of borrowing, which would further strain the government's finances.

To address the issue of high government borrowing, experts have suggested a number of measures. One approach is to increase revenue generation through tax reforms and widening the tax base. This would help reduce the government's reliance on borrowing and provide more resources for development and social welfare programs.

Another approach is to reduce government expenditures, particularly non-development expenditures. This would help narrow the fiscal deficit and reduce the need for borrowing. The government could also explore alternative sources of financing, such as international loans or issuing bonds.

It is also important for the government to work with the banking sector to ensure that the borrowing trend does not lead to a shortage of credit for private sector borrowers. The government could consider setting limits on the amount of credit that banks can allocate to the government, while also incentivizing banks to lend to the private sector.

In conclusion, the surge in government borrowing from banks in Pakistan is a cause for concern. It highlights the need for the government to improve its fiscal management and work towards reducing its reliance on borrowing. This would require a combination of revenue generation through tax reforms, reducing expenditures, and exploring alternative sources of financing. The government should also work with the banking sector to ensure that the borrowing trend does not negatively impact the private sector.