How Much Government Borrowed Commercial Banks in 2021

The government borrowings from the banking sector increased to Rs. 1.821 trillion in over nine months of the current fiscal year, as shown by data released by the State Bank of Pakistan (SBP).

This is 1.78 percent higher than the recorded borrowed amount in July to April of FY 2020, Rs. 1.789 trillion, the SBP data showed.

This increase has come primarily because of the financing of the budget deficit. Another reason for the overall high borrowings is the massive funding requirement to counter the pandemic across the country.

Under the conditions of the International Monetary Fund’s (IMF) bailout package, the central bank’s window of borrowing had also closed down for the government, which gave the latter the impetus for higher borrowings from commercial banks.

Conversely, the government returned a significant loan amount of Rs.1.508 trillion to the SBP on 9 April. This is several times the repaid amount of Rs. 627 billion was recorded in the same period of the last fiscal year, according to the central bank’s data.

The credit to the private sector had increased by 17 percent to Rs. 399.7 billion during the period under review. However, the major chunk of the banks’ investments continued to be in the risk-free government securities which had soared to Rs. 10.1 trillion in January 2021, up from Rs. 8.791 in the same time period last year.

To meet its funding requirements, the government is planning to raise Rs. 4.7 trillion from the market treasury bills this year, in addition to Rs. 825 billion from Pakistan Investment Bonds in the April-June 2021 period.

The budget deficit had increased to Rs. 1.4 trillion (2.5 percent of the GDP) during July-December 2020. The World Bank expects this deficit to remain elevated at 8.3 percent of the GDP this fiscal year.